US on debt default course

The Congressional Budget Office (CBO) has warned that the US Treasury will run out of emergency measures to prevent a debt default between July and September unless Congress raises the $31.4 trillion debt limit. The CBO has noted that the exact final date will depend on tax revenues received by the Internal Revenue Service in April.

If the revenues are significantly less than the estimates, then the emergency measures could be exhausted sooner, leading to the Treasury running out of funds before July. The CBO also revised its projection for the annual federal budget deficit over the next decade, which is now predicted to be $18.8 trillion, a 20% increase from its May 2021 estimate of $15.7 trillion.

Janet Yellen, the Treasury Secretary, initiated a series of established steps in January to allow the US government to continue borrowing money to meet its obligations when it reached the current debt limit.

If the extraordinary measures are exhausted before a new debt limit is passed by Congress and signed by President Joe Biden, then the US government would have to delay payments or default on its debt obligations. Both Republicans and Democrats on Capitol Hill have assured the public that the US will not default on its debt, and that a bill will be passed in time to avoid a crisis.

Republicans in the House of Representatives have demanded drastic cuts to federal spending before agreeing to vote to raise the debt limit, while Democrats argue that the majority of government spending is used to fund mandatory expenses. The CBO estimates are likely to play a major role in the upcoming debate over federal spending.

The CBO cited several factors contributing to the rise in the federal deficit over the next decade, including the cost of legislation passed by Congress last year, rising costs of Medicare, Social Security, veteran benefits and future interest payments on a higher national debt. Additionally, the agency predicted that tax revenue will not keep pace with these rising costs, while some tax revenues, such as those from gas taxes, are expected to fall.