Policy center says debt limit could be hit in mid-October

WASHINGTON (AP) — The government will likely face an unprecedented default on its debt obligations between mid-October and mid-November, a Washington think tank said Friday, seconding a warning earlier this week from the Treasury.

The “X Date,” the date when Treasury Secretary Janet Yellen will run out of maneuvering room to avoid hitting the debt limit if Congress does not act, will occur a couple of weeks after the start of the new budget year on Oct. 1 and may not be reached until as late as the middle of November, according to the Bipartisan Policy Center.

“Given the current pace of federal spending and revenues, we are reasonably confident that the X Date won't arrive before the start of the fiscal year or even the week or so following,” said Shai Akabas, director of economic policy for the center. “But this train could go off the rails shortly thereafter.”

Yellen sent a letter this week to the leaders of Congress, saying that if the government does not act, the U.S. will be unable to avert a default in October.

Yellen has been employing what are deemed in law “extraordinary measures” to keep the government functioning and from hitting the debt limit, which went back to effect on Aug. 1 after being suspended for two years.

The current limit stands at $28.4 trillion and Yellen has been using book-keeping maneuvers to disinvest various government trust funds, such as government employee pension funds, to remain below the debt ceiling.

If those resources are exhausted the government will no longer be unable to pay its bills, or even service U.S. debt, putting the country in default for the first time in its history.

Such an event would send shockwaves through the global financial system since U.S. Treasury securities are considered the safest investments in the...