The Strategist

Experts: There is risk of default in the US in September

07/09/2019 - 10:52

Already this fall, the US federal government will risk losing the ability to pay its bills in full and on time, according to the Washington Bipartisan Policy Center (BPC). The experts reckon that it may happen in the first half of September. Previously, BPC said that default threatens to occur in October-November.

After analyzing the new data, the experts came to the conclusion that in the summer the US Treasury Department would continue to spend its cash. The agency also uses emergency measures, “legally permissible maneuvers,” introducing a number of additional powers to borrow when the debt limit is reached, the BPC press release says.

"The latest data suggests a risk that Day X may come in early September, especially if federal revenues fall," said Shai Akabas, Director of Economic Policy for the center, explaining that the US Treasury is about to "exhaust its borrowing capacity."

According to BPC, the growth of US federal income for the 2019 fiscal year was "sluggish" and amounted to less than 3%. In particular, lower than expected were corporate income tax collections, which can be explained by tax cuts in 2017.

“Despite the fact that the most probable date of day X is the beginning of October, the uncertainty remains high, and it would be foolish for politicians to take the risk of default,” Shai Akabas added. He stressed that the new calculations of experts "revealed a dangerous scenario that cannot be ignored."

Recall that during the presidency of Donald Trump, elected in 2016, the US national debt has grown by more than $ 2 trillion. The level of public debt began to level off at the beginning of Mr. Trump’s term, but rose again in 2018. In February 2019, the US national debt exceeded $ 22 trillion for the first time in history. According to the Congressional Budget Office, if no action is taken, by 2028 the US national debt will reach 96% of GDP.