US on track to miss debt payments as soon as Oct. 19: analysis

The Bipartisan Policy Center (BPC) on Wednesday narrowed its estimate of how long the Treasury Department could stave off a default with the U.S. less than two weeks away from an unprecedented debt ceiling crisis.

The BPC, a nonpartisan think tank that closely tracks the debt limit, said the Treasury is likely to miss payments necessary to keep the country solvent between Oct. 19 and Nov. 2. They previously estimated the so-called X date to arrive between Oct. 15 and Nov. 4.

While the BPC’s new projection falls just after Treasury Secretary Janet Yellen’s estimate of an Oct. 18, BPC director of economic policy Shai Akabas said lawmakers have no more time to waste.

“If we are to avoid crossing the Rubicon, Congress must act before, not on, the X Date to ensure the full faith and credit of the United States,” Akabas said. 

Experts widely agree that a U.S. debt default could trigger an economic and financial crisis with global implications. The federal government would suddenly be unable to fund basic services, leaving tens of millions of federal employees, military personnel and Social Security recipients without income and with no ability to staunch the bleeding through fiscal support.

Global financial markets, which rely on the seamless flow of trillions of dollars of U.S. Treasury bonds, would also likely seize and drastically drive up interest rates.

“It would be catastrophic to not pay the government’s bills, for us to be in a position where we lack the resources to pay the government’s bills. It really undermines confidence in the full faith and credit of the United States, our willingness to stand behind our debts and make sure that we pay them,” Yellen said Tuesday on CNBC’s “Squawk Box.”

“I fully expect it would cause a recession as well.”

A crisis or sudden expense before the X date could also shorten the window of time for lawmakers to restore Treasury’s borrowing capacity. 

“Even leading up to October 19, the Treasury Department will find itself with dangerously low cash levels. An unexpected event during that time frame could escalate into a financial crisis,” Akabas said.

Despite the high stakes of default, Republican senators have remained dedicated to blocking every Democratic attempt to raise or suspend the debt ceiling. GOP senators have insisted that Democrats use the budget reconciliation process, which only requires a simple majority to pass legislation, to keep the country solvent on their own.

While Democrats could pass a bill to raise the debt ceiling with only 51 votes if Republicans didn’t filibuster, GOP senators want the process of averting a default to be as politically and procedurally complicated as possible. Republicans have justified their blockade by pointing to Biden’s proposed multitrillion-dollar social services and climate bill, even though raising the debt ceiling is necessary to pay past expenses approved by both parties.

“Reconciliation is the hard way and this should be done the hard way. We’re talking about the biggest expansion of government, the biggest tax increase in American history. It ought to be hard, not easy,” said Senate Minority Whip John Thune (R-S.D.) on Tuesday.

Democrats, however, have refused to use the reconciliation process and insist Republicans must move aside if they’re unwilling to take responsibility for a bipartisan run-up of the debt. 

The GOP voted three times to raise the debt ceiling under former President Trump without taking any action to reduce the national debt.

“It’s impossible to do that now,” said Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee. “There’s too many pitfalls, it takes too long.”