The nonpartisan Congressional Budget Office warned, today, that the federal government would be at risk of a default as soon as July if lawmakers fail to raise the debt limit.
The Treasury Department is currently using accounting gimmicks to keep paying federal obligations, after hitting the statutory debt ceiling last month. Treasury Secretary Janet Yellen signaled last month that those measures would enable Treasury to keep paying the government’s bills at least until early June.
Today’s CBO estimate is, thus, an updated timeline.
“If the debt limit remains unchanged, the government’s ability to borrow using extraordinary measures will be exhausted between July and September 2023,” the CBO estimated.
The CBO noted that the “Treasury could run out of funds before July” if tax receipts—-including those from April—-come in weaker than it projected.
The government hit the statutory limit for outstanding debt, $31.4 trillion, on January 19. Wall Street analysts have estimated that the extraordinary accounting measures that the Treasury is now using to it to keep under the limit amount to about $500 billion.
Republicans, who control the House of Representatives, have threatened to hold off on lifting the debt ceiling until Democrats agree to cut future spending. The Biden White House has refused to negotiate over the issue.
Republicans have floated the idea of prioritizing what bills the government pays by, for example, paying interest on the national debt, while, for example, stiffing outside contractors. (Just when the United States needs to be ramping up the production of ammunition to help Ukraine beat back the current Russian offensive.)
The Treasury and the White House have warned that even if it is possible (and legal) to get the Treasury’s computer system to pay some bills and not others, the global financial markets could well treat paying some bills but not others as equivalent to a default by the United States.