Treasury Risks July Payment Default If Lawmakers Fail to Raise Debt Limit, CBO Says

The nonpartisan Congressional Budget Office warned that the federal government would be at risk of a payment default as soon as July if lawmakers fail to raise the debt limit.

The Treasury Department is currently using accounting maneuvers to keep making good on federal obligations, after hitting the statutory debt ceiling last month. While Treasury Secretary Janet Yellen signaled at the time those measures would last at least until early June, Wednesday’s CBO estimates offer an updated timeline.

“If the debt limit remains unchanged, the government’s ability to borrow using extraordinary measures will be exhausted between July and September 2023,” the CBO estimated.

The CBO’s projection for the so-called X-date will provide investors with a new focus for when the federal government will be at risk of a payments default. Yellen on Tuesday reiterated her warning that an “economic and financial catastrophe” would ensue if Congress doesn’t act.

The CBO highlighted that the “Treasury could run out of funds before July” if tax receipts — including in the crucial April time frame — come in weaker than it projects.