Congress’ official budgetary scorekeeper projected Tuesday that the federal government will risk a default on its debt around the end of September if Congress does not raise the debt ceiling before then.
The Congressional Budget Office estimated in a new report that the Treasury Department will run out of options for paying incoming bills without issuing new debt around the end of the federal fiscal year, which is Sept. 30.
The timing could tie debate the debate over government funding to consideration of the debt ceiling. The debt ceiling is a statutory cap on federal debt. Raising it does not allow new government spending but rather allows the Treasury to issue more debt in order to pay bills that Congress previously incurred.
But the CBO hedged slightly on the timing of when the debt ceiling must be raised, noting that tax collections and spending decisions will also factor into the exact timing.
“The timing and size of revenue collections and of outlays over the next several months could, however, differ noticeably from CBO’s projections,” the report said. “Therefore, the extraordinary measures could be exhausted and the Treasury could run out of cash either earlier or later than CBO projects.”
The federal government has borrowed about $1.5 trillion more since the debt ceiling was suspended, bringing the national debt close to $22 trillion, the CBO reported.
The Trump administration is already advocating for an increase to the debt ceiling, which was suspended until March 1.
In testimony before the Senate Banking Committee earlier on Tuesday, Federal Reserve Chairman Jerome Powell cautioned against Congress refusing to raise the debt ceiling or otherwise jeopardize payment to debts owed.
“It’s beyond even considering … it’s just something that can’t even be considered,” said Powell, when asked about the potential economic impact the U.S. might face if Congress declines to raise the debt ceiling. “It’d be a very big deal not to pay our bills when and as due.”
