Hard Deadline for U.S. Debt Limit in October or November: Think Tank

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By Jonathan Nicholson

The Treasury Department will continue to be able to borrow without Congress raising or suspending the federal debt limit into October or November, later than previously forecast, a Washington think tank said.

“The Bipartisan Policy Center today updated its debt limit projections, which now show that absent congressional action, the Treasury Department will no longer be able to pay all of its bills in full and on time at some point in October or November this year,” the BPC announced March 2. Previously, the BPC estimated Treasury could continue to borrow until at least mid-summer of 2017.

The debt limit has been suspended since November 2015 (Pub. L. No. 114-74), but that suspension expires on March 15. On March 16, the debt limit will reset at a new, higher level to include all the debt—estimated to be around $2 trillion— accumulated during the suspension period.

Various Factors

When that reset occurs, Treasury will be on the brink of breaching the limit again and will be forced to use “extraordinary measures"—accounting moves often used in the past to temporarily stay below the limit. How much time that will buy Treasury to continue to borrow and pay the government’s bills depends on a variety of factors, including spring tax inflows to Treasury and the rate of federal spending.

Treasury has said it would be able to borrow for a period of time after the debt limit reset, but has not said how long, and could wait until it has a better handle on the crucial April tax season receipts to give a forecast. Analysts who watch the debt closely say Treasury has at least a few months’ worth of borrowing room with the extraordinary measures.

Nancy Vanden Houten, senior research analyst with Princeton, N.J.-based Stone & McCarthy Research Associates, said she is forecasting the Treasury to run out of borrowing room sometime in September, earlier than the BPC’s forecast.

Higher Uncertainty Level

The BPC said payments from the government to federal trust funds could make Oct. 2, the first business day in the new fiscal year, tough to navigate.

“The possibility of major fiscal policy changes this year and heightened volatility around tax revenues mean that any projections have a higher level of uncertainty this time around. But the fact is that this date will be reached if no action is taken by policymakers,” said Shai Akabas, the BPC’s director of fiscal policy.

To contact the reporter on this story: Jonathan Nicholson in Washington at jnicholson@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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