The Congressional Budget Office (CBO) has warned that the United States could face the risk of defaulting on its payment obligations by early June if the debt ceiling is not increased. This assessment is in line with Treasury Secretary Janet Yellen’s deadline of June 1 for a potential default.
The ongoing standoff between Republicans and Democrats over raising the $31.4 trillion statutory borrowing cap is putting the country’s creditworthiness at significant risk. Negotiations between White House officials and congressional staff are still ongoing, but a meeting between President Joe Biden and top lawmakers was postponed until next week.
The CBO report suggests that if available cash and extraordinary borrowing measures can last through June 15, then the Treasury can probably finance government operations through at least the end of July. However, the extent to which the government can fund its ongoing operations will remain uncertain throughout May, even if the Treasury ultimately runs out of funds in early June.
The CBO added that there is a possibility that revenue collections and outlays could differ from projections. The Treasury reported a cash balance of $154.8 billion as of Wednesday, and the CBO estimates that it has around $41 billion of borrowing capacity under extraordinary measures as of April 30.
The Treasury will make outlays of approximately $50 billion in mid-May to cover interest due on 10-year notes and longer-dated bonds, with $10 billion to $16 billion in outlays at the end of May.
