This week in Bidenomics: The debt ceiling 'X Date' begins to menace

Debt limit deadline looms ahead of vote by House lawmakers

and President Biden.

Scroll back up to restore default view.

·Senior Columnist

Sat, April 22, 2023, 2:49 AM GMT+9·4 min read

Everybody wants to ignore the federal debt-ceiling drama, the flagellation ritual Congressional Republicans periodically inflict on the nation. And it’s usually safe to do that.

But the moment of reckoning is drawing into view, which means investors may need to buckle up and grab the Jesus handle until Congress does its job and gets back to business as usual.

The government officially hit the federal borrowing limit in January, which means the Treasury can’t issue any more debt until Congress passes a new law raising the limit. Treasury can move money around to keep paying the bills for a while. But eventually, Treasury will hit the “X date,” when there’s simply not enough cash to cover all the bills and the government will default on some of its obligations if Congress doesn’t allow it to borrow more.

When is the X date? For a while, it seemed likely to arrive in mid to late summer. But recent reports suggest the X date could come sooner, perhaps as soon as June. That’s because federal tax receipts during the tax filing season appear to be weaker than expected. That leaves the government with less incoming revenue to pay its bills, which means the point at which it will come up short will come sooner.

The Biden administration is due to provide data on recent tax receipts, with an X date update, the week of April 24. “This is a huge catalyst to watch,” Evercore ISI policy strategist Tobin Marcus wrote in a recent analysis. “If we get a June ‘X date,’ hold onto your hats.”

U.S. President Joe Biden convenes the fourth virtual leader-level meeting of the Major Economies Forum (MEF) on Energy and Climate at the White House in Washington, U.S., April 20, 2023. REUTERS/Kevin Lamarque

President Joe Biden's administration is due to provide data on recent tax receipts, with an X date update, the week of April 24. REUTERS/Kevin Lamarque

Republicans and Democrats in Congress have made little progress on a deal to raise the borrowing limit, given the assumption they’d have until August or September to work something out. An earlier X date could turbocharge negotiations, but also spook markets that have been tuning out this needless drama.

For all the brinkmanship, Congress has always raised the debt ceiling, often at the last minute, and prevented the nation from defaulting on its obligations. But the process has inflicted some real damage. The case study is 2011, when ascendent Tea Party Republicans insisted it was worth risking a default to demand spending cuts and reduce federal borrowing.

This week in Bidenomics: The debt ceiling “X Date” begins to menace

This week in Bidenomics: The debt ceiling 'X Date' begins to menace

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