The nonpartisan Congressional Budget Office (CBO) warned on Wednesday that the federal government will run out of cash to pay its bills between July and September unless Congress raises the nation’s $31.4 trillion debt ceiling. This comes after the U.S. formally hit the debt limit on Jan. 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 CBO estimate comes a day after U.S. Treasury Secretary Janet Yellen warned again that “a default on our debt would produce an economic and financial catastrophe.” After meeting with President Biden at the White House on Feb. 1, 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.
The U.S. government’s debt held by the public is expected to balloon from 98% of GDP this year to 118% in 2033 – which would be the highest level ever recorded – as interest costs and mandatory spending outpace the growth of revenues and the economy. It is anticipated that GDP will reach 195% by the year 2053
The CBO also predicts “stagnant output, rising unemployment, gradually slowing inflation, and interest rates that remain at or above their levels at the beginning of the year – before the economy subsequently rebounds.” The agency noted that deficits as a share of the economy are expected to grow from 5.3 percent this year to 6.9 percent of GDP in a decade, “a level exceeded only five times since 1946.”
The CBO’s director Phillip Swagel said in a statement 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.” He stressed that the projection is uncertain because the timing and amount of revenue collected and money spent could differ from its estimates.
If Congress doesn't raise the debt limit, the “extraordinary measures” the Treasury is taking to pay America's bills will run out between July and September, the CBO said in its report.
0. “US could default as early as July: CBO” msnNOW, 15 Feb. 2023, https://www.msn.com/en-us/news/politics/us-could-default-as-early-as-july-cbo/ar-AA17wLPx
1. “Debt ceiling: CBO finds government could be at risk of default ‘between July and September'” Yahoo Money, 15 Feb. 2023, https://money.yahoo.com/debt-ceiling-cbo-finds-government-could-be-at-risk-of-default-between-july-and-september-193301099.html
2. “The U.S. could run out of cash to pay its bills between July and September” KSUT Public Radio, 15 Feb. 2023, https://www.ksut.org/2023-02-15/the-u-s-could-run-out-of-cash-to-pay-its-bills-between-july-and-september
3. “The U.S. could run out of cash to pay its bills between July and September” WAMU 88.5, 15 Feb. 2023, https://wamu.org/story/23/02/15/the-u-s-could-run-out-of-cash-to-pay-its-bills-between-july-and-september
4. “Deficit set to hit $1.4 T this year amid persistent inflation, federal experts say” POLITICO, 15 Feb. 2023, https://www.politico.com/news/2023/02/15/inflation-persist-until-2026-federal-experts-00083033
5. “US could default on debt between July and September if Congress doesn't act, CBO projects” CNN, 15 Feb. 2023, https://www.cnn.com/2023/02/15/politics/debt-ceiling-default-cbo-congress/index.html
6. “How the US's new debt limit timeline will put Social Security payments and loans at risk” USA TODAY, 15 Feb. 2023, https://www.usatoday.com/story/news/politics/2023/02/15/cbo-debt-ceiling-social-security-payments/11251749002/
7. “Federal Debt and the Statutory Limit, February 2023” Congressional Budget Office, 15 Feb. 2023, https://www.cbo.gov/publication/58906
8. “CBO says U.S. will breach debt ceiling ‘between July and September’” NBC News, 15 Feb. 2023, https://www.nbcnews.com/politics/congress/us-debt-ceiling-deadline-july-september-cbo-rcna70673