If the debt limit remains unchanged, CBO projects that the Treasury will likely run out of cash in early to mid-October—leading to delays of payments for the government’s programs and activities, a default on its debt obligations, or both.
The debt limit—commonly referred to as the debt ceiling—is the maximum amount of debt that the Department of the Treasury can issue to the public and to other federal agencies. That amount is set by law and has been increased over the years in order to finance the government’s operations. The debt limit was suspended on November 2, 2015; on March 15, 2017, the suspension expired, and the Secretary of the Treasury announced a “debt issuance suspension period.” During such a period, existing statutes allow the Treasury to take a number of “extraordinary measures” to borrow additional funds without breaching the debt ceiling.
CBO projects that if the debt limit remains unchanged, those measures will be exhausted and the Treasury will most likely run out of cash in early to mid-October. (However, the timing and magnitude of revenues and outlays over the next few months could vary noticeably from CBO’s projections, so those measures could be exhausted and the Treasury could run out of cash earlier or later than CBO projects.) The government would then be unable to pay its obligations fully, so it would have to delay making payments for its programs and activities, default on its debt obligations, or both.
CBO previously projected that the extraordinary measures would be exhausted and the Treasury would run out of cash sometime in the fall. The range of possible dates has narrowed as the budget outlook for this year has become clearer and CBO has increased its estimate of the Treasury’s net borrowing needs. CBO currently projects that the deficit for this year will be $693 billion, which is $134 billion more than the agency estimated in January—though some of that increase is the result of noncash transactions, which do not affect the Treasury’s borrowing needs.