04/19/2023
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.
Highs and lows of U.S. cashflow will grow increasingly dicey, intensifying the partisan stalemate as the nation moves closer to defaulting on its $31.4 trillion in debt.
