WASHINGTON – The drop-dead deadline for Congress to increase the government's borrowing authority and avoid a devastating economic default is early to mid-October, says a government estimate released Thursday that delivered another challenge to Republican leaders.
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Thursday's Congressional Budget Office report also predicts that the federal government's budget deficit will spike to $693 billion this year, $134 billion more than it predicted in January. The worsening deficit picture is mostly due to slipping projections of tax revenues.
Congress must act by the October debt deadline or else risk an economy-rattling, first-ever default on U.S. obligations.
The CBO report gives Congress slightly more time than Treasury Secretary Steven Mnuchin has estimated. He has asked lawmakers to increase the so-called debt ceiling before leaving Washington for their August recess — but has also said the government can avert default through September.
The national debt is almost $20 trillion. A 2015 debt limit law expired in March, and Mnuchin has been using accounting maneuvers to keep the government solvent.
The upcoming votes in both the House and the Senate promise to be a challenge to GOP leaders such as Speaker Paul Ryan, R-Wis. Many Republicans refuse to vote to increase the borrowing cap, which means Republicans controlling Washington are sure to have to rely on Democrats to pass an increase.
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The breathing room offered by the CBO report and Mnuchin's recent statements probably mean that Congress won't act on the politically toxic debt limit issue until September. It would add to a crush of business that month, which includes stopgap legislation to avert a government shutdown when the budget year ends Sept. 30.
If Congress doesn't raise the debt limit in time, CBO warns it would "ultimately lead to delays of payments for government programs and activities, a default on the government's debt obligations, or both."
Asked about the latest estimate during a White House news conference, Mnuchin said "the sooner that they do this the better."
On the deficit, CBO says "one reason for the sharp rise in the deficit in 2017 is the slow growth in revenue collections." It predicts that revenues will rise by only 1 percent this year, even as spending grows by 5 percent, mostly because of continuing growth in government benefit programs such as Social Security and Medicare.
All told, CBO predicts that cumulative deficits will rise by $686 billion over the coming decade.
CBO estimates are based on current law, so they don't reflect any assumptions about the course Republicans may take on repealing and replacing the so-called Obamacare law. But the projected $686 billion increase would dwarf the improvements to the government's deficit picture that would result from either the House or Senate health care legislation, which blends benefit cuts and tax cuts to reduce deficits by up to $321 billion over the coming decade.
The CBO also forecasts significantly slower growth in the economy than promised by Trump's budget, which many critics said was overly optimistic.
At first, CBO puts the growth rate for 2017 at 2.2 percent, which is in line with the Trump administration's promised 2.3 percent increase.
But CBO sees a slowdown over the next couple of years, with growth over 2019-2020 averaging just 1.5 percent. Trump's budget promises growth of 2.9 percent in 2019 and long-term growth of 3 percent a year starting in 2021.
The agency says it will tally up Trump's budget next month, using its less optimistic growth and revenue projections. Trump promises a balanced budget by the end of a 10-year span, but the upcoming CBO study is likely to rebut those claims.