The Congressional Budget Office said on Friday there was a “significant risk” that the federal government could run out of money in the first two weeks of June and the US could default.
The warning comes as the White House and congressional leaders have spent a week negotiating how to raise the $31.4 trillion borrowing limit. The Treasury Department is taking what are known as extraordinary fiscal maneuvers to keep paying the country’s bills without breaching the debt ceiling formally reached on Jan. 19. sources could be exhausted as early as June 1.
The bipartisan Budget Office outlined the financial burden facing the government amid ongoing legislative conflict. He also pointed out that not only spending but also the timing of entering the government and revenues are difficult to predict.
The Congressional Budget Office said in a report, “If debt limits are not raised or suspended before Treasury funds and contingency funds are exhausted, the government will delay or default on some projects. Or they will be forced to do both,” he said. Released on Friday.
The report predicted that a default would lead to “credit market distress, disruption of economic activity and a rapid rise in Treasury borrowing rates.”
Treasury Secretary Janet L. Yellen warned this week that a default would have disastrous consequences.
“A default would threaten the progress we have made in our hard work over the past few years in recovering from the pandemic,” the prime minister said Thursday at a press conference in Japan ahead of a meeting of G7 finance ministers. It will be possible,” he said. “And that would trigger a global recession that would set us back even further.”
The day that US cash runs dry, known as X-Date, could come later this summer. The Budget Office said that if the Treasury Department has enough money to get through June 15, the quarterly influx of tax revenues and additional temporary measures will allow the government to “continue paying at least through the end of the year.” It’s possible,” he said. July. ”
Four congressional leaders, including President Biden and House Speaker Kevin McCarthy, were originally scheduled to meet again on Friday to discuss the debt ceiling after failing to reach agreement in the first face-to-face session on Tuesday. A second meeting is expected next week, after which Biden leaves for Japan on Wednesday to attend the G7 summit. In the meantime, staff on both sides are trying to reach some kind of agreement to avoid a default.
The decision to postpone the talks is seen as a positive development in which the two sides could reach an agreement, but it remains unclear whether an agreement will be reached in time. Mr McCarthy has argued for significant spending cuts and the withdrawal of Mr Biden’s clean energy policies as a prerequisite to raising the debt ceiling. The president urged Republicans to raise the borrowing limit, arguing that it would only allow the United States to pay bills already approved by Congress.
White House press secretary Carine Jean-Pierre said on Friday that the meeting had been postponed as administration and congressional officials continued their private discussions over plans to raise the debt ceiling. The White House continued to insist the hike was non-negotiable, but the president said he was open to discussing other spending and budget issues with Republicans.
“The meetings over the last few days have been productive,” Jean-Pierre said, adding that finding a solution to prevent defaults was “very urgent”.
The country’s long-term fiscal outlook remains problematic and will only harden the Republican position that the government must restrain spending. In a separate report released on Friday, the Congressional Budget Office projected a federal budget deficit of $1.5 trillion this year, slightly higher than expected in February. The annual deficit is expected to nearly double over the next decade, reaching a total of more than $20 trillion by 2033.