Urgent Warning: CBO Projects U.S. Could Run Out of Money to Pay Its Bills by July
The Congressional Budget Office (CBO) issued an urgent warning on Wednesday, predicting that the U.S. could run out of money to pay its bills as soon as July if the debt limit isn’t raised.[0]
In its latest report, the nonpartisan agency said that if Congress fails to act before the “extraordinary measures” the Treasury is taking to pay the nation’s obligations are exhausted, the government would have to delay payments, default on its debt obligations, or both.[1]
The CBO projected that, if the debt limit remains unchanged, the government’s ability to borrow using extraordinary measures will be exhausted between July and September 2023—that is, in the fourth quarter of the current fiscal year.[2]
The CBO now projects the cumulative deficit over the next decade will be $3 trillion larger than it estimated last May, largely because of newly enacted legislation and changes in CBO’s economic forecast, including higher projected inflation and interest rates. The projected cumulative deficit for 2024 to 2033 is estimated to be $20.2 trillion, which represents 6.1% of the U.S. gross domestic product[3]
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.[4] By 2053, it is projected to reach 195% of GDP[5]
The Congressional Budget Office forecasts that the economy will experience “output stagnation, increasing unemployment, a gradual decrease in inflation, and interest rates that stay at or higher than their pre-pandemic levels – prior to the eventual economic recovery.”
After meeting with President Joe Biden, 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.[6] McCarthy declared that he would not accept a standalone bill to boost the debt ceiling without any spending reductions.[6]
The latest projection from the Congressional Budget Office (CBO) has increased the intensity of the debate taking place in Congress regarding the debt ceiling.[7] Some Republicans in the House have resisted an increase of the debt limit unless Democrats agree to spending cuts, while the Biden administration has said that it will not negotiate over the debt ceiling and that a discussion over spending should occur separately.[7]
The Congressional Budget Office has issued a report that is a dire warning for Congress to take action quickly to prevent a disastrous default.[5]
0. “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
1. “Debt ceiling: CBO finds government could be at risk of default ‘between July and September’” Yahoo News, 15 Feb. 2023, https://news.yahoo.com/debt-ceiling-cbo-finds-government-could-be-at-risk-of-default-between-july-and-september-193301099.html
2. “U.S. could default as soon as July if the debt limit isn't addressed, Congressional Budget Office report says” CBS News, 15 Feb. 2023, https://www.cbsnews.com/news/us-debt-limit-july-default-report/
3. “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
4. “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
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. “The U.S. could run out of cash to pay its bills between July and September” WBUR News, 15 Feb. 2023, https://www.wbur.org/npr/1157217811/us-debt-ceiling-limit-july-cbo
7. “US risks default as soon as July unless debt ceiling is raised, agency estimates” WLS-TV, 15 Feb. 2023, https://abc7chicago.com/us-risks-default-as-soon-as-july-unless-debt-ceiling-is-raised-age/12820284
