The United States Treasury will exhaust its emergency measures to prevent a debt default somewhere between July and September unless Congress extends the $31.4 trillion debt limit, the Congressional Budget Office projected Wednesday.
According to the most recent forecast, the exact date will depend on the tax receipts received by the IRS in April. Should those revenues decrease significantly from the CBO’s forecasts, “the exceptional measures could be depleted sooner, and Treasury could run out of funds before July,” CBO director Phillip Swagel warned in a statement Wednesday.
Additionally, the CBO reduced its forecast for the magnitude of the yearly federal budget deficit for the following decade. The agency’s current forecast for the deficit over the next decade is $18.8 trillion, which is 20% higher than its estimate from May of last year, which was $15.7 trillion.
In January of this year, the United States exceeded its current debt ceiling, prompting Treasury Secretary Janet Yellen to launch a series of “extraordinary measures” that permitted the government to continue borrowing money to meet its obligations.
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If these methods are exhausted before President Joe Biden can sign a new debt ceiling enacted by Congress, “the government would be forced to suspend payments for certain programmes, default on its financial commitments, or both,” according to Swagel.
At a press conference on Wednesday afternoon, Swagel said that the CBO will give a new estimate in May that takes into account tax collections for 2022.
Republican and Democratic leaders on Capitol Hill have repeatedly promised the public that the United States will not default on its debt and that an agreement will be reached and a law will be passed in time to avoid a crisis.
No one knows what this legislation will look like or how it will earn majorities in the narrowly Republican-controlled House and the barely Democratic-controlled Senate.
A lot of House Republicans have asked for big cuts to federal spending before they will vote to raise the debt ceiling. They have used their power within the GOP to get their demands heard.
In the same way that household debt is a result of household spending, Republicans believe that the debt ceiling and annual federal spending are intimately linked.
But Democrats respond that the majority of every dollar spent by the government is used to cover a mandated expense like Social Security payments or interest on the national debt and that federal spending cannot be slashed like a home budget.
The CBO estimates that came out on Wednesday are likely to be a big part of the upcoming fight over how much the government should spend.
The CBO says that the big increase in the federal deficit over the next 10 years is due to a number of things, such as the cost of laws passed by Congress in the previous year, rising costs for Medicare, Social Security, and veteran benefits, and future interest payments on a bigger national debt.
Meanwhile, the government estimated that tax collection would not keep pace with these rising costs. And certain tax receipts are likely to diminish, like those from gas taxes, as more Americans drive electric vehicles.