For all the concern over just when the government might run short of money to pay its bills, it turns out that no one, not even the U.S. treasury secretary, can be absolutely sure exactly when the country faces a potential default — what officials are calling the “X-date.”
Calculating when the country is going to run out of money requires monitoring major fluctuations in cash flowing into and out of the Treasury and factoring in the timing and size of big payments coming due, among other factors.
Now, with only a few days left for the White House and congressional leaders to negotiate a deal that would allow the government to borrow more money before the U.S. hits the statutory debt ceiling, knowing the drop-dead date is crucial.
And amid all the squabbling over the debt, the X-date itself has inevitably become a subject of political rancor.
WHAT IS THI “X-DATE”?
The X-date arrives when the government no longer has enough of a financial cushion to pay all its bills, having exhausted the “extraordinary measures” it's been using since January to stretch existing funds.
Treasury Secretary Janet Yellen's latest calculation is that the U.S. could default as early as June 1 if there's no deal to raise the legal borrowing limit to support bill paying.
In addition to Treasury, several outside groups and companies try to independently pin down the date, including the Congressional Budget Office, Moody’s Analytics and the private Bipartisan Policy Center, by poring over public data on government cash flows and changes in debt. Their estimates are all within a few days of Treasury's projections on the drop-dead date.
Shai Akabas, from the Bipartisan Policy Center, helped coin the term "X-Date" along with future Federal Reserve chair Jerome Powell back in 2011.
“We defined it as the day after which the federal government would not be able to meet all of its obligations, meaning that if policymakers didn’t act by the X-date, then the default would occur the next day. And we quickly realized that that was incredibly difficult for people to understand,” Akabas said.
It was then revised, supposed to be known as the day on which the government doesn’t meet all of its obligations, he said.
HOW IS THE DATE CALCULATED?
This is where bureaucrats really wonk out. They study things like the Daily Treasury Statement, which offers a detailed accounting of the government’s coffers and provides insight into the movement of money.
Treasury's Office of Fiscal Projections works with career staff from the Offices of Tax Analysis, Economic Policy and Debt Management to produce a forecast of when the government will exhaust its resources.
Just like everyday Americans who tally up their upcoming bills, the government knows a lot about its coming obligations. And it's not just about servicing its existing debts.
For instance, on June 1, Treasury will have to pay out $47 billion in Medicare payments, $12 billion in military and civil retirement benefits and $12 billion in veterans benefits, according to a BPC analysis of Daily Treasury Statements.
On the next day, the agency will have to pay out $27 billion in Social Security and Medicaid payments.
WHAT ELSE CAN AFFECT THE X-DATE?
All sorts of factors — even the weather.
This year, for example, taxpayers in areas that experienced weather disasters — including California, New York and large swaths of the South — have been granted filing extensions for the 2022 tax season.
That means delayed income tax payments coming in that can reduce cash flow.
A big infusion of quarterly tax payments is expected to come in on June 15, which could help tide the country over for weeks if the Treasury can hold out that long. But that's looking increasingly less likely.
WHO'S QUESTIONING THE X-DATE?
Some Republicans are openly questioning whether June 1 is truly the day the federal government might no longer be fully able to pay its bills.
How far are lawmakers willing to go to test that theory? Are they less willing to compromise if they don’t believe an economic calamity is right around the corner?
“Everybody’s relying on Janet Yellen to tell us this magical day. Show us. Show us the math," said Rep. Byron Donalds, R-Fla.
When asked if that sentiment was in the back of his mind during negotiations, Donalds replied, “I think it’s in the back of everybody’s mind.”
Rep. Dusty Johnson, R-S.D., said Yellen's June 1 projection should be treated as “realistic.” But he added that “the fact that the White House appears to have no urgency has started to make us wonder whether they’re dealing with a different deadline than we are.”
Rep. Dan Bishop, R-N.C. said “Well, it’s not like the calamity strikes on June 1. It’s something that gets to be more problematic over the course of a number of days. So I think people need to calm down a little bit.”
McCarthy, asked about the X-date by Larry Kudlow on Fox Business on Wednesday, said that “whoever is the secretary of the Treasury, I’m going to take whatever date they say.”
“If she says that’s the date, that’s the date," McCarthy said.
Another lead GOP negotiator, Rep. Patrick McHenry, R-N.C., said he, too, believes Yellen.
“She’s a straight shooter and I don’t think there’s any wiggle room for us,” McHenry said.
