US Set to Hit Debt Ceiling by Mid-2027, DC Think Tank Says (1)

The Treasury Department will likely need to take steps to avoid a default on the national debt as soon as early next year, according to an initial forecast ahead of a potential partisan standoff on raising the debt ceiling.

The US will likely hit its statutory borrowing limit between late winter and mid-summer of 2027, according to the Bipartisan Policy Center, a Washington, DC-based think tank. The Treasury Department has enough resources to undertake extraordinary measures for another six to nine months after that, according to the center’s calculations, allowing the US to avoid a default on the national debt while Congress debates how to extend federal borrowing limits.

Republicans raised the debt ceiling by $5 trillion, to $41.1 trillion, as part of last summer’s tax-and-spending law (Public Law 119-21), avoiding the need to negotiate with Democrats as they passed sweeping tax cuts that cost trillions of dollars in lost revenue in the coming years.

The Trump administration has blown through more than half of that new borrowing authority since then, teeing up a congressional debate over how to address growing national deficits or else risk a potentially catastrophic default on the debt they are building.

“Our fiscal position is unsustainable,” said Shai Akabas, vice president of economic policy at BPC. “It was a little bit refreshing on the last episode to see that there are more people that understand that the dynamic we’ve had for the last 15-plus years is not really serving anybody’s interests.”

The BPC’s wide range for a potential “X date,” when Treasury runs out of accounting maneuvers to avoid default, stems from significant unknowns. They include military spending on the war with Iran, the judicial dismantling of Trump’s tariff agenda, and changing economic conditions brought on by the tax law and Middle East conflict.

More spending could deplete cash reserves faster, while increased revenues could stall their exhaustion until as late as early 2028. Treasury’s cash and debt management will influence when the ceiling is hit, the analysis shows.

Lawmakers should not wait too long to reach the accord necessary to increase or suspend borrowing authority, the center argued. Doing so could cause borrowing costs to rise if the US credit rating is downgraded again and make it harder to respond to the next fiscal crisis.

“We’ve seen what the debt limit brinkmanship has brought us so far, and none of that has been good,” Akabas said. “There’s an opportunity to take a better path, and the sooner we can get started on that the better.”