U.S. likely to default on debt between July and September unless Congress acts, CBO says
U.S. House Speaker Kevin McCarthy answers questions from reporters at the U.S. Capitol about debt limit talks at the White House, on Wednesday, Feb. 1, 2023. Photo by Jennifer Shutt/States Newsroom
WASHINGTON — Congress has until at least July to broker a bipartisan debt agreement if lawmakers want to avoid a first-ever default, according to the Congressional Budget Office.
The nonpartisan scorekeeper, which typically details how much legislation would cost, released a report Wednesday saying that U.S. lawmakers and the Biden administration have until sometime between July and September to raise or suspend the debt limit.
CBO, however, cautioned in its report the window is uncertain, since the amount of money flowing into the federal government from taxes and other revenue sources fluctuates, as does the amount of money distributed for programs ranging from Social Security and Medicare to military paychecks to public lands programs.
“In particular, income tax receipts in April could be more or less than CBO estimates,” the report states. “If those receipts fell short of estimated amounts … the extraordinary measures could be exhausted sooner, and the Treasury could run out of funds before July.”
Debt limit struggles
Congress voted three times during the Trump administration to suspend the debt limit, with all the votes garnering bipartisan support.
Congress has voted once during the Biden administration to raise the debt limit, though the House and Senate passed that legislation without the backing of the vast majority of Republican lawmakers.
That $2.5 trillion raise to the nation’s borrowing capacity that Democrats approved last year ran out last month, when the nation’s debt limit reached the $31.4 trillion limit.
Treasury Secretary Janet Yellen has since used accounting maneuvers called extraordinary measures to ensure the federal government can keep paying all of its bills in full and on time, but those measures are expected to expire between July and September, according to CBO’s analysis.
If that happens without a new debt limit law, the Treasury Department would no longer be allowed to borrow money to pay for all of the programs that Congress has approved.
Since the nation has never reached that point, it’s somewhat unclear what exactly would happen.
But the federal government would be limited to spending what money it has on hand, leading to sweeping cuts to government programs that officials may or may not be able to direct.
Yellen has repeatedly warned Congress against moving too close to the default date, sometimes called the x-date.
“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Yellen wrote in an early January letter warning of the debt limit.
“Indeed, in the past, even threats that the U.S. government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”
Biden budget request coming
President Joe Biden, speaking from Lanham, Maryland, on Wednesday afternoon, said the budget request he plans to release on March 9 will reduce the deficit by $2 trillion over the next decade, though he rejected GOP calls to tie together negotiations on the debt limit and federal spending.
“Some of our Republican friends in the House are talking about taking the economy hostage over the full faith and credit of the United States,” Biden said. “They say unless I accept their economic plans, which are totally irresponsible, they’re not going to pay the national debt, which took 200 years to accumulate.”
Biden called on House Republicans to release a budget for the upcoming fiscal year. He said that after that, they can sit down and talk about what issues Democrats and Republicans agree on and negotiate areas where they differ on how the federal government spends money or brings in revenue.
But Biden said he made it clear to Speaker Kevin McCarthy, a California Republican, and other GOP lawmakers in his State of the Union address that he “will not negotiate whether or not we pay our debt.”
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