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Debt ceiling clock starts ticking: The U.S. could run out of money to pay its bills as early as mid-December

The country will most likely no longer be able to meet all of its debt obligations and hit the so-called X date between mid-December and mid-February, according to a new estimate from the Bipartisan Policy Center. If lawmakers don't address the debt ceiling, the U.S. would go into default for the first time, which economists warn would be catastrophic for the global economy.

Earlier this month, Congress moved to raise the debt limit by $480 billion, which would allow the government to keep paying the bills through early December. But in a letter to congressional leaders last week, Treasury Secretary Janet Yellen said the department will need to keep using so-called extraordinary measures, such as not investing in some retirement funds and suspending the sale of some securities. She said it was "imperative" for Congress to act.

"The 11th-hour deal to raise the debt limit just days before the X date did stave off catastrophe, but it was only a temporary fix," said Shai Akabas, director of economic policy at the Bipartisan Policy Center. "With another debt limit crisis on the horizon in a few short months, the clock is ticking for Congress to once again protect the full faith and credit of the United States."

The Bipartisan Policy Center's roughly two-month range of when the U.S. could stop being able to pay its bills is wider than their previous projection because the deadline is further away. But the organization, like the Treasury, said the X date estimate is uncertain because of the coronavirus pandemic and its ongoing economic effects. 

While raising the debt limit allows the government to pay what it already owes and does not greenlight new spending, Congress could pass legislation that would make the U.S. hit the X date sooner. 

"Another unusual factor this time around is the high degree of policy uncertainty," said Akabas. "House passage of the Bipartisan Infrastructure Framework might result in a large transfer to the Highway Trust Fund that would accelerate the debt limit X date."

The House again delayed voting on the infrastructure bill Thursday amid pushback from progressive lawmakers, who say it needs to be passed with the embattled social spending agenda being moved through Congress in the reconciliation process. But the Senate-passed infrastructure bill has a $118 billion transfer from the Treasury to the Highway Trust Fund, which if passed and the funds were moved could speed up the X date, the Bipartisan Policy Center said. 

Democratic leaders do not have the Senate votes to raise or suspend the debt limit without threat of the filibuster, but have rejected using the budget reconciliation process, which would only require 50 votes in the Senate. 

Republican Senate Minority Leader Mitch McConnell, who has called for Democrats to use reconciliation, said GOP senators would not step out of the way and allow Democrats to vote to increase the debt limit without the threat of a filibuster again. 

President Joe Biden has suggested amending the filibuster to allow the debt ceiling to be addressed with a simple majority, but Senator Joe Manchin shot down that idea earlier this month — leaving how lawmakers could address the debt ceiling unclear.

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