WASHINGTON – The government could run out of cash to pay its bills in early to mid-October, unless Congress raises the federal borrowing limit, according to a new analysis from the Congressional Budget Office released Thursday.
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The Treasury Department has been using cash-conservation measures to continue meeting the government's obligations since mid-March, when federal debt hit Congress's self-imposed limit at nearly $20 trillion. Treasury Secretary Steven Mnuchin has implored lawmakers to raise the debt ceiling, with no conditions attached, before they leave for a five-week summer recess July 28.
Mr. Mnuchin said earlier this month Treasury could continue to pay the government's bills through the beginning of September, but declined to give a more specific date for when Treasury expects to exhaust its so-called extraordinary measures.
"I urge, given the importance of this, that we send a message to the rest of the world and the markets that we take our credit very seriously, " he said.
Analysts have said the government could run out of room to meet its obligations -- including payments on its debt, Social Security and veterans benefits, for example -- sometime in the fall, though estimates have ranged from early September to November.
CBO estimated in March that Treasury would run out of cash sometime in the fall, but said the range of dates has narrowed as the budget outlook for this year has become clearer.
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But it cautioned that "the timing and magnitude of revenues and outlays over the next few months could vary noticeably from CBO's projections," and Treasury could run out of cash earlier. Failing to increase the debt limit "would ultimately lead to delays of payments for government programs and activities, a default on the government's debt obligations, or both."
The extraordinary measures Treasury has taken so far include suspending the issuance of new state and local government securities and savings bonds, and limiting investments in certain federal employee pension plans. It still has several other measures available, CBO said.
In a separate report issued Thursday, CBO said weaker tax collections this year have led it to increase the projected budget shortfall for 2017.
CBO now expects the deficit to rise to $693 billion in the fiscal year ending Sept. 30, or 3.6% of gross domestic product, from $587 billion, or 3.2%, in 2016. That was higher than estimates released in January, when CBO projected the deficit would decline in 2017 to $559 billion, or 2.9% of GDP.
CBO said "surprisingly weak tax collections" led it to lower its revenue projections for this year by $89 billion since January. At the same time, outlays are expected to rise by $45 billion, driven almost entirely by higher costs of government student-loan programs.
Overall, the budget deficit is expected to fall next year before rising steadily over the next decade, primarily due to higher interest costs, the result of faster rate increases from the Federal Reserve. CBO estimates the budget shortfall would hit 5.2% of GDP by 2027, while total debt held by the public is projected to total 91% of GDP.
CBO's projection of the cumulative deficit over the next decade increased about 7% from its January forecast, primarily because it assumes that increases in funding for war-related activities in Afghanistan -- included in a short-term spending bill Congress passed in April -- will continue in the future.
Write to Kate Davidson at firstname.lastname@example.org
(END) Dow Jones Newswires
June 29, 2017 14:42 ET (18:42 GMT)