The U.S. government could run out of money and start missing payments on things as diverse as social security and military salaries between Oct. 15 and Nov. 4, according to new analysis from the Bipartisan Policy Center.
The analysis, released on Friday as Congress debated whether to lift the US borrowing limit, showed a narrower window during which the United States could default on its debt if the limit of what the government can borrowing is not relieved.
Republicans and Democrats in Congress have shown no signs of progress in breaking the deadlock over increasing or suspending the debt limit – restricting the government’s ability to borrow money to pay his bills. The dysfunction of Congress leaves the United States potentially less than a month away from what economists say would be a catastrophic economic shock.
“New data shows Congress has only a few weeks to settle the debt ceiling,” Shai Akabas, director of economic policy at the Bipartisan Policy Center, said in a statement. “If they don’t, the U.S. government risks missing or delaying critical bills that will fall due in mid-October that millions of Americans rely on, military paychecks and retirement benefits. child tax credit advance payments. “
The United States officially reached its legal debt limit at the end of July, but the Treasury Department used “extraordinary measures” to curb or delay investment and avoid default. It’s harder to predict the true deadline this year, as government payments linked to the pandemic have reduced clarity about when certain taxes will be collected and when the federal money will come out.
If Congress does not act, the United States will be in uncharted territory.
In its analysis, the policy center said if the actual deadline for exceeding the debt limit was Oct. 15, the first end of its expected range, the Treasury Department would be around $ 265 billion to pay. all his bills until mid-November. About 40% of the money that is owed would go unpaid.
“In reality, on a day-to-day basis, it would quickly become impossible to make all payments for important and popular programs,” the report says, highlighting Social Security, Medicare, Medicaid and active military service pay. .
The Treasury Department said it does not have a formal contingency plan if the debt limit is exceeded. However, in previous stalemates, Treasury officials pondered what they would do.
The Bipartisan Policy Center notes that the Treasury may try to prioritize payments, which essentially means paying some bills and not others. He could also choose to delay all invoices and then make the payments once enough income has been received to cover the payments owed for an entire day.
However, either of these situations would present legal and logistical issues and likely rock markets as the Treasury Department struggled to pick winners and losers.
“Reality would inevitably be chaotic,” the report says.