May 2023 Debt Limit Analysis

Absent congressional action, BPC projects that the “X Date”—the date when the federal government will be unable to pay all of its bills in full and on time—is most likely to occur between early June and early August of 2023, with an elevated risk between June 2 and June 13.

• The Treasury Department (Treasury) ran up against its $31.4 trillion debt limit and deployed emergency borrowing authority—known as “extraordinary measures”—to continue fully financing government operations on January 19, 2023. On May 22, 2023, Secretary Yellen notified Congress that Treasury may not be able to meet all the government’s obligations after June 1, 2023.
• BPC projects that if policymakers do not act on the debt limit, Treasury will most likely have insufficient cash to meet all its financial obligations sometime between early June and early August 2023, with an elevated risk between June 2 and June 13 (what we call the X Date).
• Due to the unpredictability of cash flows, and thus, all debt limit projections, policymakers should act ahead of the projected X Date window if they intend to ensure that all obligations of the U.S. government are paid in full and on time.
• In February, BPC underscored the importance of 2023 tax collections on the timing of this year’s X Date and cautioned that depressed revenues could force a “too close for comfort” situation prior to quarterly tax receipts due on June 15.
• The strength of government revenues through the remainder of May will materially impact whether the X Date falls near the beginning of BPC’s range, before a projected influx of quarterly tax receipts around June 15. If revenues can sustain operations through that date, Treasury would likely be able to forestall default through the crucial date of June 30, when approximately $145 billion in one-time, additional extraordinary measures become available by suspending investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. In such a scenario, the additional room created by these measures would support Treasury’s ability to make good on our obligations through at least early July and perhaps several weeks beyond.
• Economic and financial risks grow as debt limit brinkmanship drags on. On May 4, 2023, Treasury sold $50 billion of four-week securities scheduled to mature on June 6 at a record 5.84%—the highest yield for any Treasury bill auction since 2000—demonstrating an aversion among investors to hold debt maturing around the X Date.
• BPC’s range takes into account publicly available data from the Treasury Department and the Congressional Budget Office. BPC will further update its projections in the coming days.