CBO Signals Potential Crunch Point If Congress Doesn’t Focus on Debt Ceiling

The government’s capacity to borrow through “extraordinary measures” is likely to run out by August or September, signaling a potential crunch point for federal debt management later this year, the Congressional Budget Office said on Wednesday.

However, the precise date could deviate considerably from the CBO’s estimated “X date”—the point when the government exhausts its funds—potentially occurring well before or after August or September. Variations in the timing and volume of revenue collections and expenditures over the coming months may not align with the CBO’s current forecasts.

“If the government’s borrowing needs are significantly greater than CBO projects, the Treasury’s resources could be exhausted in late May or sometime in June, before tax payments due in mid-June are received or before additional extraordinary measures become available on June 30,” the CBO said in its assessment.

“Conversely, if borrowing needs fall short of the amounts in CBO’s projections, the extraordinary measures will permit the Treasury to continue financing government activities longer than expected,” it added.

Should the debt limit remain unchanged or unsuspended once the extraordinary measures are depleted, the U.S. government would lack the funds to meet all its obligations. This scenario would force the federal government to either delay payments for certain activities, default on its debt commitments, or both, the CBO warned.

In 2023, Congress suspended the debt ceiling until January 1, 2025. On January 2, 2025, the limit was reestablished at $36.1 trillion, reflecting the total debt outstanding as of January 1. On that same day, a pre-scheduled redemption of securities in the Medicare trust fund reduced outstanding debt by $54 billion, providing the Treasury with a temporary buffer for additional borrowing. This adjustment pushed back the start of the “debt issuance suspension period” to January 21, 2025, when the Treasury began relying on extraordinary measures to manage cash flow.