The Congressional Budget Office (CBO) said on Wednesday that the government’s ability to keep paying its bills and prevent defaulting on its debt will hit a wall sometime between July and September.
That’s a slightly longer deadline than the one predicted by Treasury Secretary Janet Yellen. She has warned Congress that “extraordinary measures” to prevent debt default would likely “be exhausted before early June.”
The federal government hit its $31.4 trillion debt limit on January 19, and has been undertaking Yellen’s “extraordinary measures” ever since.
“If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government would be unable to pay its obligations,” the CBO said in Wednesday’s report. “As a result, the government would have to delay making payments for some activities, default on its debt obligations or both.”
In a speech on Tuesday, Yellen warned that a debt default would spell “catastrophe.”
“Household payments on mortgages, auto loans, and credit cards would rise, and American businesses would see credit markets deteriorate,” she said. “On top of that, it is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security.”
According to Moody’s Analytics, a stock market plunge as a result of a U.S. debt default could wipe out 6 million jobs and $15 trillion in wealth.
The United States has never defaulted on its debt. But it has repeatedly come close, perhaps most notably in 2011 when the U.S. suffered its only credit rating downgrade in its history, amid the rise of the conservative tea party movement in the House.
