US govt could breach debt limit after Oct 1: think tank

WASHINGTON -- The Bipartisan Policy Center (BPC), a Washington, DC-based think tank, said on Thursday that the US federal government is likely to run out of borrowing room and breach the debt limit after Oct 1.

"Treasury's updated guidance means that the 'X Date' will likely arrive after the start of fiscal year 2022," Shai Akabas, director of economic policy at BPC, said in a statement, referring to the date when the federal government will no longer be able to pay its bills in full and on time.

"That would realistically allow Congress to address the debt limit as part of an appropriations package and potentially pair that move with a longer-term reform of the statute to eliminate financial risk from these recurring episodes," he said.

Akabas also cautioned that the unique fiscal environment of a pandemic adds unprecedented uncertainty to any debt limit forecast.

"While uncertainty is perhaps greater than ever before, the way to minimize short-term financial risk remains the same: acting on the debt limit soon," he said.

Akabas's updated forecast came after the US Treasury Department said Wednesday that it may take certain "extraordinary measures" to continue to finance the government on a temporary basis if the debt limit is reinstated on Aug 1.

"In light of the substantial COVID-related uncertainty about receipts and outlays in the coming months, it is very difficult to predict how long extraordinary measures might last," the department said, noting extraordinary measures could be exhausted much more quickly than in prior debt limit episodes.

As part of a two-year budget deal passed by US Congress in August 2019, the federal debt limit was suspended through July 31, 2021. If lawmakers can't reach another agreement before then, the ceiling would automatically be reinstated on Aug 1 and the US Treasury wouldn't be able to raise additional cash from the sale of government securities.

As of today, the US national debt has exceeded $28.25 trillion.