The federal government will be unable to fully pay its obligations sometime between July and September if Congress doesn’t address the debt limit before then, the Congressional Budget Office said Wednesday.
That’s when the agency expects the Treasury Department will exhaust its ability to borrow additional funds using extraordinary measures.
However, the CBO stressed in its report that its projection is uncertain because the timing and amount of revenue collected and money spent could differ from its estimates. For instance, if income tax receipts in April come in lower than expected because of last year’s stock market downturn, the extraordinary measures may be exhausted sooner, and the government could run out of funds before July.
The CBO’s report is yet another warning to Congress that it needs to act soon to avoid a catastrophic default. But House Republicans and President Joe Biden have made little progress so far in resolving their differences on dealing with the budget cap.
The agency also released its 10-year budget and economic outlook, in which it projected major increases in federal budget deficits and debt over the next decade.
In addition, the CBO estimates that inflation-adjusted economic growth “comes to a halt” in 2023 because of the Federal Reserve’s interest rate hikes. It expects inflation to decline this year and the unemployment rate to rise through early 2024, reflecting the slowdown in economic growth.
The US hit the debt ceiling set by Congress on January 19, forcing the Treasury Department to start taking extraordinary measures to enable the federal government to keep paying its bills on time and in full. The actions are mainly behind-the-scenes accounting maneuvers.
In a letter to House Speaker Kevin McCarthy last month, Treasury Secretary Janet Yellen said that the measures would last…
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