CBO Warns US Could Run Out of Money to Pay Bills by 2023

The Congressional Budget Office (CBO) issued a report on Wednesday warning that, if the debt limit is not raised, the United States government could run out of money to pay its bills between July and September of 2023.^[0] The CBO’s projection is uncertain, however, due to potential changes in revenue collections and outlays over the following months.^[1]

The CBO’s estimate of the 2023 budget deficit is now $400 billion more than it was in May of 2022.^[0] The CBO’s projection of the cumulative deficit over the 2023-2032 period is now $3.1 trillion (or about 20 percent) more, largely due to newly enacted legislation and changes in the CBO’s economic forecast.^[2]

The CBO estimates that the U.S. debt held by the public will rise from 98% of gross domestic product (GDP) in 2023 to 118.2% of GDP in 2033, with an average increase of 2 percentage points each year.^[3] This would be the highest level ever recorded.

In addition, the CBO projects that inflation-adjusted economic growth “comes to a halt” in 2023 due to the Federal Reserve’s interest rate hikes. Inflation is anticipated to decrease in 2021, while the unemployment rate is projected to increase until 2024, due to the economic expansion slowing down.^[4] Inflation is expected to decline this year and continue to fall until 2027, but it may be higher over the next two years than estimated last May.^[5]

The Congressional Budget Office (CBO) has attributed the predicted deceleration in growth to the Federal Reserve's attempts to contain inflation through increasing interest rates. As a result, inflation is unlikely to cool to the Federal Reserve’s target of 2 percent until 2026.^[6]

In an accompanying statement, CBO Director Phillip Swagel said 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.”^[7]

The House Republicans are demanding that spending be reduced alongside any rise in the debt ceiling, aiming to achieve a balanced budget within the next ten years or so.^[8] But Democrats and Republicans remain divided on where and how to make cuts, with both parties pledging not to cut any Medicare or Social Security benefits.^[9]

Treasury Secretary Janet Yellen began deploying “extraordinary measures” last month to keep from exceeding the $31.4 trillion statutory borrowing cap.^[10]

0. “Senate Finance Committee Chair Releases Statement on CBO Debt Ceiling Projection” MyChesCo, 16 Feb. 2023, https://www.mychesco.com/a/news/national/senate-finance-committee-chair-releases-statement-on-cbo-debt-ceiling-projection/

1. “Federal Debt and the Statutory Limit, February 2023” Congressional Budget Office, 15 Feb. 2023, https://www.cbo.gov/publication/58906

2. “U.S. has until July-September to avert debt-ceiling breach, CBO estimates” Seeking Alpha, 15 Feb. 2023, https://seekingalpha.com/news/3936604-us-has-until-july-september-to-avert-debt-ceiling-breach-cbo-estimates

3. “CBO sees U.S. deficit growing by $19 trillion in the next 30 years” Kitco NEWS, 15 Feb. 2023, https://www.kitco.com/news/2023-02-15/CBO-sees-U-S-deficit-growing-by-19-trillion-in-the-next-30-years.html

4. “Debt limit forecast says US could be in default by summer. Here's how that could impact you” USA TODAY, 15 Feb. 2023, https://www.usatoday.com/story/news/politics/2023/02/15/cbo-debt-ceiling-social-security-payments/11251749002/

5. “Debt Ceiling 2023: US Will Be Unable to Pay Bills Sometime Between July & September, New Data Shows” GOBankingRates, 16 Feb. 2023, https://www.gobankingrates.com/money/economy/debt-ceiling-2023-us-unable-pay-bills-between-july-september

6. “Deficit set to hit $1.4T 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

7. “CBO projects US will add $19 trillion to the national debt in the next decade” New York Post , 16 Feb. 2023, https://nypost.com/2023/02/16/cbo-projects-us-will-add-19-trillion-to-the-national-debt-in-the-next-decade/

8. “US yearly deficits projected to average $2 trillion over next decade: report” The Hill, 15 Feb. 2023, https://thehill.com/business/3860026-us-yearly-deficits-projected-to-average-2-trillion-over-next-decade-report

9. “U.S. Government Projected to Add $18.8 Trillion In New Debt by 2033” Reason, 16 Feb. 2023, https://reason.com/2023/02/16/u-s-will-add-18-8-trillion-in-new-debt-by-2033/

10. “CBO: Debt limit to hit as soon as July, budget picture worsens” Roll Call , 15 Feb. 2023, https://www.rollcall.com/2023/02/15/cbo-debt-limit-to-hit-as-soon-as-july-budget-picture-worsens