© Reuters. FILE PHOTO: The U.S. Capitol building is seen on the day of U.S. President Joe Biden’s State of the Union Address to a joint session of Congress on Capitol Hill in Washington, U.S., February 7, 2023. REUTERS/Elizabeth Frantz
By David Lawder
WASHINGTON (Reuters) – The Congressional Budget Office (CBO) on Wednesday will provide some clarity on when the United States may default on its payment obligations if lawmakers fail to raise the federal borrowing limit amid a tense partisan spending stand-off.
The non-partisan fiscal referee agency’s 2023 baseline budget forecast also will reveal its first comprehensive analysis of federal deficits in the wake of recent spending legislation, including President Joe Biden’s $430 billion climate and healthcare act and a military-heavy $1.66 trillion government funding package with more aid to Ukraine.
Those 10-year forecasts could enflame the debate over spending in Congress and prompt calls for deeper cuts from Republicans who now control the House of Representatives.
A second CBO report will describe the “current debt situation and CBO’s expectation about when the Treasury will no longer be able to pay its obligations fully if the debt limit is not raised.”
After hitting the $31.4 trillion borrowing cap on Jan. 19, Treasury Secretary Janet Yellen said the Treasury can keep up payments on debt, federal benefits and make other outlays at least through June 5 using cash receipts and extraordinary cash management measures.
Some fiscal analysts say that Treasury can last further into the summer, but the CBO forecast will provide a reliable benchmark, said Shai Akabas, economic policy director at the Bipartisan Policy Center, a centrist think tank in Washington.
“This will be a good-level set of the discussion because the only point in time out there now is the June 5 reference in Secretary Yellen’s letter, which is not an X-date projection,” Akabas said, using a common term in Washington for when the Treasury will begin to default.
YEAR OF THE DEBT LIMIT
So far in 2023, not a day has gone by on Capitol Hill without lawmakers jousting over the debt limit, as Democrats press for a quick, clean increase in Treasury borrowing authority and Republicans insist on first nailing down significant reductions in future government spending.
Social Security and Medicare, the government’s popular pension and healthcare programs for the elderly, are at the center of the debt limit/government funding debate, as both parties also jockey to define the contours of the 2024 presidential and congressional campaigns.
“There has been a Republican drumbeat to cut Social Security and Medicare,” Senate Majority Leader Chuck Schumer, a Democrat, reminded reporters on Tuesday.
Republican Leader Mitch McConnell has labored, without much success so far, to smother such talk.
“Let me say one more time. There is no agenda on the part of Senate Republicans to revisit Medicare or Social Security. Period,” he said at a press conference.
