The nonpartisan Congressional Budget Office (CBO) on Wednesday released a projection that the U.S. government will need to raise the debt limit before this fall to avoid a potential default on the nation’s obligations.

The CBO estimated that the government’s ability to continue borrowing using so-called extraordinary measures “will probably be exhausted in August or September 2025.” There is uncertainty surrounding the timing of when that will occur due to potential variations in tax collections and government spending in that period. 

CBO noted that if the government has to borrow significantly more than expected, the extraordinary measures could be tapped out in late May or in June before tax payments due in mid-June are received or additional measures become available on June 30. If borrowing is less than expected, the exhaustion of extraordinary measures could be later than August or September.

“If the debt limit was not raised or suspended, the Treasury would not be authorized to issue additional debt other than to replace maturing or redeemed securities,” the CBO wrote regarding what would happen once extraordinary measures are tapped out. “That restriction would ultimately lead to delayed payments for some activities, default on its obligations, or both. Those actions could result in distress in credit markets, disruptions in economic activity, and rapid increases in borrowing rates for the Treasury.”

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The gross national debt currently exceeds $36 trillion. (Samuel Corum/Getty Images/File)

The uncertainty surrounding the timing of when the “X Date” for the exhaustion of extraordinary measures comes as lawmakers in Congress are not only dealing with the annual spending bills but also Republicans’ push to extend the 2017 tax cuts through the reconciliation process.

Shai Akabas, vice president of the Bipartisan Policy Center’s (BPC) economic policy program, told FOX Business in an interview that while Congress is juggling several aspects of fiscal policy, it should prioritize an extension or suspension of the debt limit because of the potential impact it would have on the economy.

“This should rise to the top of the priority list because it is the one item that could potentially have the biggest impact on the economy if an extension of the debt limit is not extended in time,” Akabas said. “I expect and hope that policymakers are squarely focused on this as we go through the coming weeks, in addition to all the other important items that are on their agenda.”

BPC on Monday released its own X Date analysis, which found it’s likely to arrive between mid-July and early October, barring action by Congress. 

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Akabas noted that there is additional uncertainty about the X Date in this year’s debt limit saga due to the Trump administration’s tariff plans, which are “anticipated to bring in some additional revenue” that “may already be materializing,” though delays and implementation changes can impact that.

“That’s one component of the tariff equation. The other is that it could have effects in the opposite direction of creating some of the economic uncertainty that’s been widely discussed and preventing hiring decisions that might bring additional revenue into the government, and also might lead to additional support payments to impacted parties like farmers,” he said. 

He added that disaster relief is also a significant variable causing uncertainty given the expectation that Congress will enact a spending bill to fund agencies’ relief efforts, while affected taxpayers also have tax filing extensions that will impact the timing of the federal government’s tax receipts.

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With Congress on the clock to address the debt limit amid other fiscal policy debates, the ramifications of failing to act should also spur lawmakers to ensure they take action in time. 

“If Congress fails to address the debt limit on time, the effects could be widespread and severe in a way that is felt by every American household and business, and affects our economic prospects far into the future,” Akabas explained. “We don’t know that because it would be unprecedented for us to not be meeting all of our obligations, but if we were not, it could lead to markets reacting severely, it could lead to interest rates rising, it could lead to a whole host of other outcomes that we can’t necessarily predict.”

Akabas added that the debt limit also serves “as a reminder of our underlying fiscal challenge that we have not wrapped our arms around and have continued to kick the can down the road on difficult decisions that are necessary both on spending and the tax side. All budgeting is an exercise in trade-offs, and recently Congress has been wholly unwilling to make those tough calls.”

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“The public, I think, needs to understand that we do need to address the debt limit itself and make sure that we are making good on our obligations, but it’s also a reminder that we do need Congress to be working in a bipartisan fashion to tackle the underlying debt that is leading to the need to increase the debt limit,” he added.