The Congressional Budget Office (CBO) has stressed that “there is a significant risk that the Treasury will run out of funds at some point in the first two weeks of June” if the debt ceiling is not raised or suspended. The CBO’s projection is in line with the estimate by the Treasury Department that a U.S. default could occur on June 1.
CBO Sees ‘Significant Risk’ of the U.S. Defaulting in June
The Congressional Budget Office (CBO) released an update to the Budget Outlook for 2023 to 2033 Friday. The report updates CBO’s budget projections released in February.
“CBO’s baseline projections are developed in accordance with procedures set in law. Those procedures require the agency to project spending, revenues, deficits, and debt without regard to the statutory limit on the issuance of new federal debt. That limit (now set at $31.4 trillion) was reached on January 19, 2023,” the report details, adding:
CBO estimates that if the limit is not raised or suspended, there is a significant risk that the Treasury will run out of funds at some point in the first two weeks of June.
The CBO’s estimate aligns with that of U.S. Treasury Secretary Janet Yellen, who said earlier this month that the Treasury may not be able to pay all of the government’s bills as early as June 1 “if Congress does not raise or suspend the debt limit before that time.”
Many people have warned about the implications of the U.S. defaulting on its debt obligations. The International Monetary Fund (IMF) said there would be “very serious repercussions.” Federal Reserve Chair Jerome Powell warned of “uncertain and adverse” consequences. The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, expects “significant” and “lasting effects” on investors, issuers, and markets. Goldman Sachs believes the consequences will be “catastrophic.”
Meanwhile, former President and 2024 presidential candidate Donald Trump has urged Republican lawmakers to let the U.S. default on its debt if the Democrats do not agree to spending cuts. “It’s better than what we’re doing right now because we’re spending money like drunken sailors,” he said.
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