The Congressional Budget Office (CBO) has warned that the U.S. government risks a catastrophic default between July and September if the nation’s debt limit isn’t raised in time. According to the report, the Treasury Department has begun using “extraordinary measures” to meet its debt obligations but is expected to run out of money by July. The CBO estimates that debt held by the public will rise from 98% of GDP in 2023 to 118.2% of GDP in 2033, and forecasts that it will reach 195% of GDP by 2053 if current budgetary policies remain unchanged.
House Republicans say they won't approve a debt limit increase without spending cuts, but Democrats don't want to cut spending and there are few indications as to how the impasse will ultimately be resolved. Treasury Secretary Janet L. Yellen has warned that the special accounting maneuvers may only offer lawmakers until early June to raise or suspend the country’s borrowing cap.
The CBO also issued economic projections, saying that inflation-adjusted economic growth “comes to a halt” in 2023 and the unemployment rate will rise through early 2024, reflecting the slowdown in economic growth. Inflation is expected to decline this year and continue to fall until 2027 but is unlikely to cool to the Federal Reserve’s target of 2 percent until 2026.
After meeting with President Joe Biden at the White House, Republican House Speaker Kevin McCarthy said he hoped that he and the president could reconcile their differences “long before the deadline” to raise the ceiling. But McCarthy said he would not agree to a “clean” bill that would only raise the debt ceiling without spending cuts attached.
Phillip Swagel, the CBO’s director, warned that “over the long term, our projections suggest that changes in fiscal policy must be made to address the rising costs of interest and mitigate other adverse consequences of high and rising debt.” The looming debt crisis is a stark reminder of the need for urgent action to ensure that the U.S. government can continue to pay its bills and avoid a catastrophic default.
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1. “US national debt to rise by $20 trillion over the next 10 years: CBO” Fox Business, 15 Feb. 2023, https://www.foxbusiness.com/politics/us-national-debt-rise-20-trillion-over-next-10-years-cbo
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