U.S. will default this summer unless Congress raises debt limit, CBO warns
- The Congressional Budget Office has issued a new estimate of how long the Treasury Department can sustain its extraordinary measures to prevent a debt default: Five to eight more months.
- If Congress does not pass a debt ceiling increase before these measures are exhausted, the government will have to delay certain payments, default on its debt, or both, CBO said.
WASHINGTON — The United States Treasury will exhaust its emergency measures to prevent a debt default sometime between July and September unless Congress raises the $31.4 trillion debt limit, the Congressional Budget Office projected Wednesday.
The latest projection notes that the final date will be determined by tax revenues the IRS receives in April. Should those revenues decline significantly from CBO’s estimates, “the extraordinary measures could be exhausted sooner, and Treasury could run out of funds before July,” CBO director Phillip Swagel said in a statement Wednesday.
The U.S. reached the current debt limit in January of this year, at which point Treasury Secretary Janet Yellen initiated a series of established steps, known as the “extraordinary measures,” that allowed the government to continue borrowing money to meet its obligations.
Should those measures be exhausted before President Joe Biden can sign off on a new debt limit passed by Congress, “the government would have to delay making payments for some activities, default on its debt obligations, or both,” said Swagel.
Top Republicans and Democrats on Capitol Hill have repeatedly assured the public that the United States will not default on its debt, and that an agreement will be reached and a bill passed in time to avert a crisis.
But what that legislation will look like, and precisely how it will win majorities in both the narrowly Republican-controlled House and the narrowly Democratic-controlled Senate, is anybody’s guess.
A large bloc of Republicans in the House have demanded Congress pass drastic cuts to federal spending before they will agree to vote to raise the debt limit, effectively using their leverage within the GOP to force their priorities to the front of the line.
Republicans argue that the debt limit and annual federal spending are inextricably linked, the same way household debt is a product of household spending.
But Democrats counter that the majority of every dollar spent by the government is used to fund a mandatory expense like Social Security payments or interest on the national debt, and that federal spending cannot be cut like a household budget.
This is a developing story, please check back for updates.
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