The Urgency to Resolve Borrowing Cap Standoff
The CBO's new estimate closely aligns with Treasury Secretary Janet Yellen's June 1 deadline for a potential default, emphasizing the need to resolve the standoff between Republicans and Democrats over the $31.4 trillion statutory borrowing cap.
Debt Limit Meeting Postponed
White House officials continue negotiations with congressional staff from both parties. Still, the debt limit meeting between President Joe Biden and top lawmakers has been postponed until next week, as Republican House Speaker Kevin McCarthy claims there hasn't been enough progress.
Possibility of Extended Negotiating Time
The CBO suggests that the Treasury might be able to finance government operations until the end of July if available cash and extraordinary borrowing measures last through June 15, when quarterly estimated tax payments are due.
Treasury's Access to Extraordinary Borrowing Measures
On June 30, the Treasury will access $145 billion in new extraordinary borrowing measures by suspending investments in two government employee retirement and health funds.
Government Funding Uncertainty in May
The CBO states that the government's ability to fund ongoing operations will remain uncertain throughout May, even if the Treasury runs out of funds in early June, due to possible differences in revenue collections and outlays from CBO projections.
Treasury's Current Cash Balance and Borrowing Capacity
As of Wednesday, the Treasury reported a cash balance of $154.8 billion, while the CBO noted about $41 billion of borrowing capacity under extraordinary measures as of April 30.
Upcoming Treasury Outlays
In mid-May, the Treasury will make around $50 billion to cover the interest due on 10-year notes and longer-dated bonds, with $10 billion to $16 billion in outlays at the end of May, and approximately $25 billion in Social Security and other payments on June 1.
Potential Consequences of Treasury Default
The CBO warns that a Treasury default or payment delays could result in credit market distress, economic activity disruptions, and rapid increases in Treasury borrowing rates.
CBO's Revised Baseline Budget Deficit Estimates
The CBO has also revised its baseline budget deficit estimates, reflecting current law. The changes increased the fiscal 2023 U.S. deficit forecast by $130 billion compared to a February estimate, totaling $1.539 trillion, while the estimated cumulative deficit through 2033 increased by $51 billion to $20.314 trillion.
