US government could face default risk as soon as July, analyst projects

[BumRushDaShow]

Source: Reuters

March 24, 2025 5:44 PM EDT Updated 11 hours ago


WASHINGTON, March 24 (Reuters) - The U.S. government will risk defaulting on some of its $36.6 trillion in debt sometime between mid-July and early October unless Congress acts to raise the cap on Washington's borrowing limit, the Bipartisan Policy Center think tank projected on Monday.

Lawmakers have repeatedly taken negotiations over raising the government's borrowing limit to the last minute, a trend that has rattled financial markets and led the major credit agencies to lower their ratings on the federal government's creditworthiness. The brinkmanship has continued despite the fact that Congress's own decisions, both to authorize new spending and to cut taxes, have pushed the national debt higher.

The non-partisan Congressional Budget Office on Wednesday will make its own projection for the so-called X-date, when the Treasury Department is no longer able to cover all of its obligations, according to a spokesperson. "Lawmakers cannot afford to delay action on the debt limit," Shai Akabas, vice president of economic policy at BPC said in a statement. “Addressing debt limit well ahead of the X Date should rise to the top of the priority list."

The U.S. has never defaulted on its debt and global financial markets become jittery if there is even a whiff of that potentially occurring. A 2023 debt ceiling showdown pushed the U.S. to the brink of default and hurt its credit rating.

Read more: https://www.reuters.com/world/us/us-government-could-face-default-risk-soon-july-analyst-projects-2025-03-24/

[ReRe]

1. Refresh my memory for me , please.

Didn't Mike Johnson try to raise the debt ceiling soon after Jan 20th, but it was profoundly defeated? And the reason he called for the vote on the issue was because Trump & Musk wanted the debt ceiling increased so they could jam through their tax cuts for the billionaires right off the bat? Could that be the reason for all the draconian slash & burn business that Musk has been up to? To remove taxes rolling into the treasury's coffers so the debt ceiling would have to be raised,
thereby giving Trump/Musk what they wanted all along?

[BumRushDaShow]

2. He tried to put it on the C.R. but that was a no-go

The problem for them is this - the tax cuts for the billionaires expires at the end of this calendar year.

Some want to make that "permanent" (although there is no such thing because a new Congress can repeal it if the votes are there). Others want to just "extend" it for another 5 or 10 years and go through the Wash. Rinse. Repeat (to not let it sunset).

However the CBO costing these options out show massive amounts of debt being added to do any of this because they are cutting the revenue. So they need to do massive spending cuts, including to "3rd rail" (Medicare/Medicaid, etc) programs to sort of minimize the revenue cut impact, but even that probably won't be enough.

https://www.democraticunderground.com/10143411849
https://www.democraticunderground.com/10143423285

They can do a debt ceiling increase using the "reconciliation" budget process (which is a Senate thing that allows passage of specific types of legislation without the need for the 60 vote cloture requirement - i.e., only needs a simple majority). That is one of the 3 "eligible" subjects that can be addressed via that "reconciliation" vehicle. The other 2 are "taxes" (revenue), and "spending" (although that must be "budget neutral" ). The "taxes" type is where they want to extend the tax cuts.

The RESTRICTION for use of this process is that EACH type can only be used ONCE a fiscal year (although the 3 types can be offered in single bills or in some combo of 2 or all 3).

[ReRe]

3. Thanks for clearing all that up!

So what do you think is going to happen? Something's got to give by Juneish, right?

[BumRushDaShow]

4. Most welcome!

With respect to the debt ceiling - the Treasury department uses what they call "extraordinary measures" to help to tide over and that means the "actual date" can change and be pushed later in the fiscal year depending on what they do.

I expect all of these illegal layoffs and reinstatements (although a number of people will probably not return even if reinstated) along with a mass of retirements, might have some impact on that figure. Plus whatever happens to the interest rates also might impact (bonds).

It was estimated that the red siren would start flashing in June, but again, all this stuff going on at the moment might affect what happens at that point. The article I linked to above that was done in January had this estimated chart -

[Bengus81]

5. Trump and his thugs give the rich and corporations massive tax cuts seven years ago

and now we're within a inch of default--again. 36 trillion $$$ Trump. Clinton left office with a balanced budget and $200B+ surplus to start paying down that massive debt which they thought could be accomplished in 10-12 years so maybe by 2012. Then came Bush and another round of Reagan tinkle down and blew that $200B surplus in a flash.

Then came Trump who did the same only larger. You have huge Corporations who pay NOTHING in Federal taxes and the richest of the rich pay little. Now the IRS can't chase down the rich who cheat and never pay judgments against them IF their even caught.

Three massive tax cuts for the rich and Corporate America since the 80's and Trump wants to extend them until the sun burns out. BTW Trump...how's that work going on the tax cut for the middle class?? Hell, I was still working when he made that promise but it's been so long that I'm now retired.

[Turbineguy]

6. Americans have to stop electing these fucks.

There is a limit to economic inertia.

[NH Ethylene]

7. And what if China and Japan no longer want to loan us money to increase the national debt?

And domestic investors decide the investment is too risky? I doubt any of them have forgotten Trump's remark about not making payments on the debt.