US risks debt default as soon as July: Budget office

The United States risks defaulting on payment obligations as soon as July, if lawmakers fail to resolve a gridlock and raise the federal borrowing limit, according to Congressional Budget Office estimates Wednesday.

The forecast by the nonpartisan office serving Congress comes as Republicans threaten to block the usually rubber-stamp approval for raising the nation's credit limit, if Democrats do not first agree to steep future budget cuts.

"If the debt limit remains unchanged, the government's ability to borrow using extraordinary measures will be exhausted between July and September 2023," said the CBO.

The latest estimate provides another benchmark on top of the Treasury Department's expectations.

In January, the US hit its $31.4 trillion borrowing cap, prompting the Treasury to start measures that allow it to continue financing the government's activities.

The Treasury earlier said its cash and "extraordinary measures" would likely last until early June.

"If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government would be unable to pay its obligations fully," the CBO warned Wednesday.

"As a result, the government would have to delay making payments for some activities, default on its debt obligations, or both," it added.

But the date when measures are exhausted remains uncertain as the timing and amount of revenue collections and spending could differ from projections, the CBO said.

In particular, if collections fall short, the Treasury could run out of funds before July, the office added.

Taking economy 'hostage'

For now, the Treasury's tools and regular cash inflows would allow it to finance the government's activities "until the summer without an increase in the debt ceiling, a delay in payments, or a default," the CBO said.

The White House accuses Republicans of taking the economy "hostage" in order to posture as fiscally responsible.

On Tuesday, Democratic Senate Majority Leader Chuck Schumer told reporters: "We're continuing to speak to how bad it would be to allow the nation to default.... It's going to affect every American family badly."

At the start of the month, Republican Speaker of the House of Representatives Kevin McCarthy said talks with President Joe Biden on the debt ceiling went well.

But both sides have yet to reach a deal.

It is hard for either party to say where they can find significant reductions unless they go into areas like Social Security, Medicare, Medicaid or other government-subsidized healthcare -- which are usually politically untouchable.

ME