Jason Lange

WASHINGTON (Reuters] – If Congress fails to set a legal limit for public borrowing, then the U.S. government might start defaulting on payments as early as December 21.

According to the latest data from the IRS, this projection shows that President Joe Biden is under increasing pressure to get the debt limit to $28.9 trillion raised and to prevent economic catastrophes caused by missed payments.

Congress approved legislation Thursday that would fund the government until mid-February. This avoided a shutdown. However, lawmakers are yet to acknowledge that they have allowed more borrowing and spending than the debt limit permits.

Shai Akabas (director of economic policy at the Washington-based Bipartisan Center) stated that Congress would flirt with financial ruin if it left for the holiday recess and did not address the debt limit.

If the center predicts favorable tax receipts, then the debt limit could be made binding on Jan. 28.

The non-partisan Congressional Budget Office stated Tuesday that the Treasury Department may begin missing payments before the end of the month. Treasury Secretary Janet Yellen however said Washington will likely continue to pay all its bills until at least December 15.

The Treasury Department will have no incoming tax revenue to pay its bills once it reaches its borrowing limit. The Treasury borrows almost 40 cents per dollar, so it will start to miss payments due to citizens, lenders or both.

The global financial market would feel the effects of shock waves. As the US government fails to pay all payments, including Social Security benefits and salaries for soldiers, domestic spending reductions will push it into recession.

Biden’s Democrats have razor thin majorities in both Houses of Congress. However, Republicans have pledged not to cooperate with Biden on the debt limit, which could hinder efforts to raise borrowing limits according to normal legislative rules.

As time runs out, Democrats may raise the limit by using a less time-consuming process known as “reconciliation” without Republican votes.

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