The Congressional Budget Office said Friday there is a “significant risk” that the federal government could run out of cash sometime in the first two weeks of June, causing the United States to default.
The warning came as the White House and congressional leaders spent the week negotiating how to raise the $31.4 trillion borrowing cap. The Treasury Department is using accounting maneuvers known as extraordinary measures to continue paying the country’s bills without breaching that debt ceiling, which was officially reached on Jan. 19. But the ministry said these tools may be exhausted as soon as June 1.
The impartial budget office has identified the fiscal pressures facing the government as the legislative standoff continues. He also noted the difficulty of predicting the timing and revenues of the government, as well as its expenditures.
“If the debt limit is not raised or suspended before the Treasury’s cash flow is depleted and extraordinary measures are taken, the government will have to delay payments for some activities, default on its debt obligations, or both,” the Congressional Budget Office said in a report. Released on Friday.
He predicted that defaults would lead to “distress in the credit markets, disruption to economic activity, and a rapid increase in the borrowing rates of the Treasury”.
Treasury Secretary Janet L. Yellen warned this week that the consequences of default would be dire.
“A default would threaten the gains we’ve worked so hard to make over the past few years in our recovery from the pandemic,” she told a news conference in Japan on Thursday ahead of a meeting of Group of Seven finance ministers. This will lead to a global recession that will set us back much more.
The day when we run out of cash in the US – known as the X-date – could come later this summer. If the Treasury had enough funds through June 15, the budget office said, the influx of quarterly tax receipts and extraordinary additional measures at its disposal would likely allow the government to continue paying its bills until “at least the end of July.”
President Biden and the Big Four congressional leaders, including House Speaker Kevin McCarthy, were originally scheduled to meet again on Friday to discuss the debt cap after an initial face-to-face session on Tuesday yielded no agreement. The second meeting is now expected to take place next week, before Mr. Biden departs on Wednesday for Japan for the G7 leaders’ meeting. Meanwhile, employees on both sides continue to try to strike some sort of deal to avoid default.
While the decision to postpone the meeting was seen as a positive development that could allow both sides to reach consensus, it remains unclear whether an agreement can be reached in time. Mr. McCarthy has insisted on deep spending cuts and rolling back Biden’s clean energy agenda as a precondition for raising the debt limit. The president insisted that Republicans raise the borrowing cap, arguing that it simply allowed the United States to pay bills already approved by Congress.
The nation’s long-term fiscal outlook remains problematic and can only harden the Republican position that the government should rein in spending. In a separate report released on Friday, the Congressional Budget Office said it expects a federal budget deficit of $1.5 trillion this year — slightly higher than its February forecast. The annual deficit is expected to nearly double over the next decade, totaling more than $20 trillion through 2033.
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