The Congressional Budget Office (CBO) has updated its projected timeline for when the US risks defaulting on its debt. Estimates now indicate that the federal government could face this issue during the "first two weeks of June" of this year. This comes after the Treasury Department warned last week that the US could default as soon as June 1st. Economists have cautioned that a government default could produce devastating effects for both the nation's economy and global financial markets.
This report serves as a more urgent warning to Congress, highlighting a tighter time crunch than previously expected to raise the debt ceiling. The Treasury Department revealed lower-than-expected tax receipts from last month which could have been used to stave off a default.
Treasury Secretary Janet Yellen agrees with White House officials about continuing their work towards resolving this crisis, planning to meet early next week with all principals involved.
In an update, CBO guidance stated that if tax revenues and emergency measures are implemented after June 15th, it is possible for the U.S. to avoid default in July. However, uncertainty still surrounds these predictions due to various factors such as President Joe Biden's student loan forgiveness plan awaiting an expected Supreme Court ruling.
A highly anticipated meeting between President Biden and congressional leaders aimed at charting a path forward regarding lifting the debt limit has been postponed until next week due to insufficient progress being made thus far on any deal involving spending cuts paired with a debt limit hike.
The U.S government faces serious consequences if they do not increase their borrowing capacity within those first two weeks of June; missed payments can then cause widespread economic repercussions across America. To prevent this outcome without additional assistance from Congress, some administration officials are considering invoking Section 4 of Amendment XIV which states: "...the validity of public debts shall not be questioned."
Since January 2021, extraordinary accounting measures have been employed by the Treasury Department to avoid breaching the nation's borrowing limit. The CBO has warned that if these measures and additional cash reserves are exhausted, it remains uncertain how the Treasury would react.
End-of-month payments have ranged from $10 billion to $16 billion over the last six months, funding Social Security recipients and Medicare Part A benefits such as hospital care through trust funds. With uncertainty looming throughout May regarding the government's ability to fund ongoing obligations, experts continue monitoring this situation closely for any new developments or updates on potential resolutions leading up to June 1st.
As a result of these warnings from both CBO and Treasury Department officials, Congress must act swiftly in order to prevent devastating consequences for America and its place within global financial markets.