A automotive drives next to a board at a bus stop showing a U.S. national debt figure after the U.S. government hit its $31.4 trillion borrowing limit amid a standoff between the Republican-controlled House of Representatives, President Joe Biden and Democratic legislators that may lead to a fiscal crisis in a couple of months, in Washington, U.S., January 20, 2023.
Amanda Andrade-rhoades | Reuters
WASHINGTON — The USA Treasury will exhaust its emergency measures to forestall a debt default sometime between July and September unless Congress raises the $31.4 trillion debt limit, the Congressional Budget Office projected Wednesday.
The most recent projection notes that the ultimate date will likely be determined by tax revenues the IRS receives in April. Should those revenues decline significantly from CBO’s estimates, “the extraordinary measures could possibly be exhausted sooner, and Treasury could run out of funds before July,” CBO director Phillip Swagel said in a press release Wednesday.
The CBO also revised its projection for the size of the annual federal budget deficit over the subsequent decade. The agency now believes the deficit will total $18.8 trillion over the subsequent 10 years, a figure that’s 20% higher than the agency’s estimate last May of $15.7 trillion.
The U.S. reached the present debt limit in January of this 12 months, at which point Treasury Secretary Janet Yellen initiated a series of established steps, often called the “extraordinary measures,” that allowed the federal government to proceed borrowing money to satisfy its obligations.
Should those measures be exhausted before President Joe Biden can log off on a recent debt limit passed by Congress, “the federal government would should delay making payments for some activities, default on its debt obligations, or each,” said Swagel.
The CBO will release one other estimate in May that takes into consideration the 2022 tax revenue, Swagel said at a press conference later Wednesday.
Top Republicans and Democrats on Capitol Hill have repeatedly assured the general public that the US is not going to default on its debt, and that an agreement will likely be reached and a bill passed in time to avert a crisis.
But what that laws will seem like, and precisely how it’ll win majorities in each the narrowly Republican-controlled House and the narrowly Democratic-controlled Senate, is anybody’s guess.
A big bloc of Republicans within the House have demanded Congress pass drastic cuts to federal spending before they’ll conform to vote to lift the debt limit, effectively using their leverage throughout the GOP to force their priorities to the front of the road.
Republicans argue that the debt limit and annual federal spending are inextricably linked, the identical way household debt is a product of household spending.
But Democrats counter that nearly all of every dollar spent by the federal government is used to fund a compulsory expense like Social Security payments or interest on the national debt, and that federal spending can’t be cut like a household budget.
The CBO estimates released Wednesday are prone to feature prominently in the approaching debate over federal spending.
The CBO attributed the numerous jump within the federal deficit in the subsequent decade to several aspects, including the associated fee of laws passed by Congress last 12 months, rising costs of Medicare, Social Security, veteran advantages and future interest payments on the next national debt.
Meanwhile, the agency projected that tax revenue is not going to keep pace with these rising costs. And certain tax revenues are expected to fall, like those from gas taxes as more Americans drive electric vehicles.