U.S. could hit borrowing limit as soon as May, budget office warns

The federal government could hit its borrowing limit as soon as May if tax revenue falls short of expectations, or as late as September if debt stays on its current course, Congress’s nonpartisan bookkeeper reported Wednesday – potentially requiring Republicans to dramatically accelerate their timeline on legislation that would prevent a catastrophic default.

Lawmakers are attempting to pass a massive package to extend expiring tax cuts and authorize new spending on immigration enforcement and national security – what President Donald Trump has taken to calling his “big, beautiful bill” – before Memorial Day. That legislation is also slated to include a $4 trillion increase to the debt limit, which caps how much the federal government can borrow to pay for spending it has already approved.

The government technically eclipsed the debt ceiling in January, but the Treasury Department has been taking what are known as “extraordinary measures” to delay certain payments to stretch out the government’s available cash.

As things stand now, and with big inflows of funds expected about April 15 and June 15 when tax payments are due, the government’s “X date,” or the day when the extraordinary measures won’t be enough to prevent more borrowing, could come in August or September, the Congressional Budget Office reported.

But that date is heavily dependent on how much the IRS collects this filing season. And already, officials at the tax agency are growing concerned about a sharp drop in revenue collection, which could fall by as much as 10% compared with 2024. That would mean a roughly $500 billion shortfall that could substantially hasten the X date by forcing the government to borrow more money in the short term to pay its bills.

That variability led the CBO to report a relatively wide date range.

“The projected exhaustion date is uncertain because the timing and amount of revenue collections and outlays over the intervening months could differ from CBO’s projections,” the agency wrote.

Earlier in the week, the Bipartisan Policy Center think tank estimated the X date between mid-July and early October based on its own calculations.

The Treasury Department officially sets the date after the April tax deadline.

Republicans hope to raise the borrowing limit and also extend trillions of dollars in expiring tax cuts through a process called “budget reconciliation,” which would allow the GOP to route party-line legislation around a Democratic Senate filibuster.

But an earlier-than-expected X date could force Republicans to take up the debt ceiling outside of that framework, giving Democrats leverage to extract concessions in exchange for not blocking legislation to raise the borrowing cap. The GOP would need Democratic support in the Senate to dodge a filibuster and in the House to offset Republican lawmakers who refuse to vote for any debt extensions.

Under Democratic presidents, Republicans for a generation have threatened to force the government into a default to compel massive spending cuts. Democrats have often blasted the tactic.

But now they are eyeing using that playbook themselves to block parts of Trump’s agenda. Rep. Brendan Boyle (Pennsylvania), the top Democrat on the House Budget Committee, said Wednesday: “Democrats are ready to work across the aisle to prevent a catastrophic default. But Republicans must work with us to protect Social Security, Medicare and Medicaid.”

The GOP is considering cutting benefits to social safety net programs, or altering how much the federal government will pay states to administer those programs, as part of their reconciliation package to help offset the cost of the tax cuts and other spending Trump seeks.

Without legislation to raise the debt limit by a dollar amount, or suspend it for a length of time, the government would default on its loans. That could thrust the economy into a deep recession and shake up global markets, experts say.

Much of the world’s economy relies on U.S. government debt as backstop. If the Treasury Department’s ability to make good on its debt were called into question, that could spook markets and lead employers and financial institutions to quickly pull back investments.