U.S. faces debt limit deadline between July and September

The U.S. government risks a catastrophic default between July and September if the nation’s debt limit isn’t raised in time, according to the nonpartisan Congressional Budget Office, offering a clearer estimate of the deadline that Washington faces to avert a costly political and economic crisis.

The new projection means Congress may have as little as five months to preserve the country’s ability to borrow to pay its bills, which House Republicans have refused to do unless they can first secure steep spending cuts — a position that President Biden has rejected out of concern about the consequences of fiscal brinkmanship.

The CBO delivered its estimate Wednesday as part of its regular, sprawling review of the nation’s finances, finding that the country’s fiscal health has continued to deteriorate in the face of higher spending and complicated economic head winds.

The federal deficit — the annual imbalance between what the government shells out and receives in revenue, including taxes — is expected to reach $1.4 trillion this year and average an additional $2 trillion each year after until 2032, according to its projections.

In total, the cumulative budget gap over the next decade is expected to reach $18.8 trillion, roughly $3 trillion more than the nonpartisan budget-keeper anticipated in its report last spring. That means the sum of the country’s total outstanding obligations — the debt subject to a federal ceiling under law — could reach $52 trillion in 2023, according to CBO.

The CBO attributed the rolling shortfall to a recent uptick in spending, particularly after lawmakers adopted new money to care for veterans, as well as the persistent problems of inflation and rising interest rates.

Together, those forces have made spending and borrowing more expensive for the U.S. government — much as it has for millions of families nationwide.

Those factors are also expected to create further drag on the U.S. economy, according to CBO, resulting in a “halt” to growth this year in inflation-adjusted gross domestic product, a measure of the country’s output, that should improve next year as prices fall and unemployment rises.

The new data is likely to galvanize fierce debate in Washington, where the return of divided government — with the arrival of a new House GOP majority after the 2022 election — has revived a familiar fight over fiscal austerity.

Both parties are responsible for the nation’s total debt, now exceeding $31 trillion, yet Republicans have sought to cast the imbalance as a consequence of Democrats’ twoyear control of Washington.

But the emerging political stalemate has taken on added urgency since January, when the U.S. officially reached the debt ceiling. The event has forced the Treasury Department to begin taking what it terms as “extraordinary measures” to move around money, rather than borrowing more of it, to pay for spending Congress has already enacted.

At the time, Treasury Secretary Janet L. Yellen warned that the special accounting moves may only offer lawmakers until early June to raise or suspend the country’s borrowing cap. Otherwise, Yellen predicted that congressional inaction could send shock waves through the global economy, potentially even causing a recession in the United States.

Entering the fight, House Republicans led by Speaker Kevin Mccarthy, R-calif., have pledged to use the upcoming debate over the debt ceiling as political leverage, particularly in pursuit of spending cuts.

The move marks a familiar return to the party’s brinkmanship in 2011, before it later helped former president Donald Trump raise the country’s borrowing limit repeatedly.

In recent weeks, Republicans have targeted domestic programs and agencies, including those that focus on health, labor and education.

But the party has yet to articulate specific monetary demands or release a budget, despite promising to produce a blueprint that balances the federal ledger over the next decade — an exceedingly tough task given the CBO’S grim estimates about the nation’s finances.