U.S. might not hit debt limit until October, new study says


WASHINGTON -- The U.S. might not hit its debt limit until October because of improved economic growth and higher tax revenue this year, according to a new estimate released Friday.

The projection by the Bipartisan Policy Center would give Congress and the White House more time to wrestle with the politically volatile issue.

The U.S. technically will need to raise the debt limit again next month, but the Treasury Department is expected to take steps to buy additional time. It had been expected that policymakers would need to act sometime this summer or risk a first-time government default.


The center, a well-regarded Washington think tank, said its updated projections showed the so-called X-Date, when the government would run out of borrowing power, would take place between mid-August and mid-October.

The most likely date is between early September and early October.

QUIZ: Test your knowledge about the debt limit

The center had projected in January that the U.S. debt ceiling would need to be raised by August, but there was “a realistic chance of coming even later.”

A key reason for the new projection is that the Treasury has more money than expected. Federal spending has been less than projected in anticipation of the automatic budget cuts known as sequestration, and more tax revenue has flowed to the government, in part because of higher tax rates that kicked in Jan. 1.

The nation hit its $16.4-trillion debt limit at the end of last year. But accounting maneuvers by the Treasury Department allowed the U.S. to continue borrowing for several weeks.

As part of a deal to avoid the so-called fiscal cliff combination of large tax increases and federal spending cuts, Congress in January temporarily suspended the debt limit until May 18.

At that point, the debt limit will need to be raised again. But the issue is intertwined in efforts to reduce the deficit, and congressional Republicans have demanded spending cuts at least equal to any increase in the debt limit.

A 2011 showdown over the debt limit led Standard & Poor’s to downgrade the nation’s AAA credit rating for the first time ever.

The Treasury again is expected to juggle the nation’s finances starting May 19, taking steps such as suspending sales of state and local government series Treasury securities.

At the time of the fiscal cliff deal, Treasury officials estimated that the accounting maneuvers could extend U.S. borrowing authority into the summer.


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