The U.S. government has reached its $31.4 trillion cap on borrowing money and Treasury Secretary Janet Yellen announced that her department is implementing “extraordinary measures” to move some money around and keep the nation from defaulting. So, how much time do we have before we fall off the fiscal cliff?
The truth is, the "extraordinary measures" aren't sustainable beyond a few months. There will come a day – known as the “X Date” – when the government will have to start missing payments, and the consequences will be severe if Congress doesn’t act.
When exactly is the X Date? We can’t be sure. That’s because the government receives and spends hundreds of billions of dollars each month, and the exact figures vary based on economic activity. Secretary Yellen claims it will be June 5th, but experts consider that a worst-case scenario. According to Reuters, “most analysts see the true X Date occurring somewhere between July and October.”
Jan Hatzius, chief economist of Goldman Sachs, believes Washington will eventually reach a deal to raise the debt ceiling, but “these solutions are often found at the very last moment.” Congress must act sooner than that.
Just coming close to reaching the X Date in 2011 caused the worst stock market week since the Great Recession and led to the U.S. having its perfect AAA credit rating downgraded for the first time.