(DCWatchdog.com) – The US Congress has until sometime between July and September to raise the debt ceiling; otherwise, the United States would have to default or delay its debt payments, the Congressional Budget Office (CBO) has estimated.
The Treasury Department had previously said the deadline for passing a debt limit increase would be early June. However, the new estimate of the CBO, a nonpartisan agency in the US Congress, extends that by weeks or possibly months.
Last month, the US government reached the $31.4 trillion debt ceiling. However, the Treasury Department has resorted to “extraordinary measures,” allowing it to raise extra funds without exceeding the limit.
With the Senate in Democrats’ hands and Republicans in control of the House of Representatives, a bipartisan deal would be needed to raise the debt ceiling. However, it is still early in the making since the GOP demands budget-balancing cuts in exchange for approving a new ceiling.
“If the debt limit remains unchanged, the government’s ability to borrow using extraordinary measures will be exhausted between July and September 2023,” the Congressional Budget Office said on Wednesday, as cited by The National Review.
The report notes there is no fixed date when the US government will “run out of money” because of tax revenue and spending fluctuations in the next few months. D-Day will arrive later if there is more tax income and less spending.
“If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government would be unable to pay its obligations fully,” CBO stated.
“As a result, the government would have to delay making payments for some activities, default on its debt obligations, or both,” the warning added.
Earlier, the legislative branch’s budget watchdog released revised projections for America’s budget deficit. Over the next ten years, the CBO projects cumulative deficits of $20 trillion. That is projected to amount to $1.4 trillion in the 2023 fiscal year, which started on October 1, 2020.
If the debt ceiling D-Day comes earlier, that could be ahead of the August recess for the US Congress, a timing that could motivate the lawmakers to cut a deal.
If the US government remains afloat for longer, the battle over a debt ceiling agreement could spill over into the following year’s budget debates, with the fiscal year ending on September 30.
In the latter scenario, the could be a double fight in the fall – over a deal to raise the debt ceiling and an agreement to keep funding the federal government to avoid a shutdown.
The report predicts that the significance of such a combination of fiscal battles would be enough to break the political impasse. In that case, the GOP may be able to force budget cuts upon the Biden administration, and the Democrats may be able to claim they avoided direct debt ceiling concession.