According to the CBO, the US is at “significant risk” of running out of money in June
The Congressional Budget Office said Friday there was a “significant risk” that the federal government could run out of money sometime in the first two weeks of June, leaving the United States with a default.
The warning came as leaders in the White House and Congress spent a week negotiating how to raise the $31.4 trillion borrowing limit. The Treasury Department has used accounting maneuvers, called extraordinary measures, to continue paying the country’s bills without exceeding the debt ceiling, which was officially reached on Jan. 19. However, the ministry said those tools could be exhausted as early as June 1.
The bipartisan Budget Office detailed the financial strain the government is facing as the legislative deadlock continues. It also pointed out that the timing and government revenue, as well as its spending, are difficult to predict.
“If the debt ceiling is not raised or suspended before Treasury Department cash and extraordinary measures are exhausted, the government may have to delay payments on some activities, default on its debt obligations, or both,” the Congressional Budget Office said in a report Friday published.
It predicted that a default would lead to “disruptions in credit markets, disruption to economic activity and a rapid rise in borrowing rates for the Treasury.”
Treasury Secretary Janet L. Yellen warned this week that the consequences of a default would be devastating.
“A default would jeopardize the achievements we’ve worked so hard to achieve over the past few years to recover from the pandemic,” she said Thursday at a news conference in Japan ahead of a meeting of Group of Seven finance ministers. “And it would trigger a global downturn that would set us back a lot further.”
The day the United States runs out of cash — known as the X-date — could come later this summer. The Budget Office said if the Treasury Department had sufficient funds to pay by July 15.”
President Biden and the four leading members of Congress, including Speaker Kevin McCarthy, were originally scheduled to meet again Friday to discuss the debt limit after an initial in-person meeting Tuesday failed to produce an agreement. The second meeting is now expected to take place next week before Mr Biden travels to Japan on Wednesday to attend the G-7 leaders’ meeting. Meanwhile, employees from both sides continue to try to reach an agreement to avert a default.
While the decision to postpone the meeting was seen as a positive development that could allow both sides to reach a consensus, it remains unclear whether an agreement can be reached in time. Mr McCarthy has insisted on deep spending cuts and a rollback of Mr Biden’s clean energy agenda as a condition for raising the debt limit. The president has insisted that Republicans raise the borrowing limit, arguing that this only allows the United States to pay bills that Congress has already approved.
The country’s long-term fiscal outlook remains problematic and could only add to Republicans’ position that the government needs to rein in spending. In a separate report released on Friday, the Congressional Budget Office said it is forecasting a federal budget deficit of $1.5 trillion this year — slightly higher than it forecast in February. It is estimated that annual deficits will almost double over the next decade, totaling more than $20 trillion by 2033.