Budget

Here's when the debt-limit crisis gets increasingly risky

Highs and lows of U.S. cashflow will make for a bumpy ride, intensifying the partisan stalemate as the nation moves closer to defaulting on its $31.4 trillion in debt.

By JENNIFER SCHOLTES, PAULA FRIEDRICH, and BEATRICE JIN | Published: April 17, 2023, 4:00 a.m. EDT | Last Updated: April 17, 2023, 9:41 p.m. EDT

The U.S. will default on its $31.4 trillion debt this year if Congress doesn’t raise the nation’s borrowing cap. But when, exactly? That’s harder to answer.

While Congress sets the nation's annual budget, the Treasury Department actually manages trillions of dollars beyond that, with millions of payments flowing in and out of the government’s accounts each day. And just like an everyday checking account, cash flow varies: Sometimes the government gets a flood of dollars from tax receipts, and other times it needs to pay the bills. Those dips and surges add another wrinkle to a political drama that threatens to tank the global economy.

By this summer or early fall, unless Congress acts before then, the U.S. government will be so cash-strapped it won’t be able to pay interest and principal to the country’s lenders. But before the nation reaches that point of default, it could come alarmingly close several times over the next few months as spending and revenue rise and fall — a fluctuation that could spook Wall Street, escalate pressure on negotiations between congressional leaders and President Joe Biden, and potentially force a short-term fix.

Those Hill-Biden debt ceiling talks remain at a stalemate, as Speaker Kevin McCarthy tries to rally his own members around fiscal demands and put Wall Street investors on alert ahead of a summer clash with a president who remains insistent on a clean lift.

Here’s what the next few months could look like, based on estimates from the Bipartisan Policy Center and the Congressional Budget Office.

$200B$400B$600B$800B

Jan. 19

May 31

June 30

July 31

Aug. 31

Sept. 30

Oct. 31

Best case: $800B

Worst case: $800B

Crash landing: Default

After the U.S. technically reached the $31.4 trillion debt limit in late January, the Treasury Department started taking “extraordinary measures” to keep the country from defaulting. That wonky process, which involves accounting maneuvers that reduce certain types of government debt, gave the nation a borrowing cushion of about $800 billion at the beginning of February.

But the government has many bills to pay, including sending out money to support Medicare providers, veterans benefits, Social Security checks and assistance to state and local governments.

Federal taxes come due in April, sending billions into government coffers and ensuring the country is safe from default through most of the spring. The day when the country can no longer meet its financial obligations, known as the X-date, is heavily dependent on whether those tax receipts meet, exceed or fall short of expectations.

Predicting how much cash the government will bring in during tax season is always difficult. Last year, for example, estimates from Congress’ nonpartisan budget office lowballed by about $500 billion what turned out to be record-setting revenue. This year, a difference of a few hundred billion dollars could buy — or cost — the country several months of leeway.

By late spring, the pendulum typically shifts to the spending column. If tax revenue comes in low, the nation could come extremely close to defaulting. If tax season is particularly fruitful, the extra money could keep the U.S. from defaulting until late summer or early fall — and likely keep markets rosy in the meantime.

On June 15, quarterly tax payments are due, an influx that could help buoy the nation’s cash through July. While that revenue bump is smaller than the regular tax season, quarterly payments usually bring in tens of billions of dollars as corporations, self-employed people and some other taxpayers hand over their estimated dues.

On June 30, the Treasury Department is allowed to extract about $140 billion in borrowing power from a key federal retirement fund. The accounting maneuver doesn’t affect any workers’ savings or prevent any retirees from getting their cash.

The federal government tends to run a deficit in late summer. And, by all estimates, the U.S. is most likely to reach the brink of default in August or September.

That’s an unfortunate timeframe for Congress’ 535 lawmakers, who want to escape Capitol Hill for their scheduled August recess but also historically seem incapable of reaching a bipartisan deal well in advance of a hard deadline.

More quarterly tax payments roll in on Sept. 15. If the U.S. hasn’t run out of borrowing power by then — and if Congress still hasn’t raised the debt limit or passed a short-term patch — that mid-September revenue bump will add billions of dollars to whatever borrowing authority the country has left.

With no substantial revenue coming in during October, available cash will wane quickly at this point, if it even lasts that long.

The timeline is uncertain, highly subject to the whims of federal cash flow. Despite those dangers, congressional leaders and the White House are virtually nowhere in their discussions to lift the borrowing cap.

The range is an estimate and subject to substantial uncertainty and volatility resulting from economic performance, cash flow fluctuations and other factors. As tax season wraps up, the drop-dead date for congressional action will become clearer, perhaps nudging both sides closer to a calamity-averting fix.

For now, Republicans are still trying to coalesce around formal demands in exchange for helping to lift the debt ceiling, though they’ve called generally for major discretionary spending cuts or beefed-up work requirements for federal assistance like food stamps.

In the meantime, Democrats are refusing to negotiate, hoping to extract a debt limit hike from GOP leaders with no strings attached as the country draws ever closer to a crisis.

Caitlin Emma contributed to this report.