Congress Risks August Default Without Debt-Ceiling Action: Congressional Budget Office

The latest forecast is ‘a clear warning sign,’ the Committee for a Responsible Federal Budget said.

The national debt clock displayed at a bus station in Washington on Jan. 2, 2025. Madalina Vasiliu/The Epoch Times

The United States could risk default in August or September without a debt-ceiling agreement between the White House and lawmakers, the Congressional Budget Office (CBO) said on March 26.

A new report by the federal budget watchdog projected that Congress would need to reach a deal or suspend the debt ceiling by August or September. The CBO noted that the timing could change based on revenues or outlays.

“If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government will be unable to pay all of its obligations,” the report stated. “As a result, it would have to delay making payments for some activities, default on its debt obligations, or both.”

The so-called X-date—an estimated date when the Treasury Department’s extraordinary measures used to meet financial obligations are exhausted—could be as early as May “if the government’s borrowing needs are significantly greater than CBO projects,” the report reads.

The Bipartisan Policy Center on March 24 projected that the X-date would occur between mid-July and early October. The organization added that there is a higher risk that the X-date will happen “in early June” if tax revenues fall short of expectations.

The debt limit, reinstated on Jan. 2, is the maximum amount of money the government can borrow to cover its obligations, such as interest payments and payments for public services. It was suspended in June 2023 as part of a bipartisan arrangement between then-President Joe Biden and then-House Speaker Kevin McCarthy (R-Calif.).

Since Jan. 21, the Treasury has been taking extraordinary measures to avoid breaching the debt ceiling. These actions include prematurely redeeming existing investments, tapping into its bank account at the Federal Reserve, and suspending investments in federal retirement funds.

Treasury Secretary Scott Bessent has also extended the debt issuance suspension period until the end of June.

Bessent has acknowledged the uncertainty surrounding the length of time the Treasury’s extraordinary measures could last. In a March 14 letter to House Speaker Mike Johnson (R-La.), Bessent said he expects an update in the first half of May after most receipts from the April income tax filing have been received.

“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” he said.

According to the CBO report, the Treasury “has no room to borrow under its standard operating procedures” because it already hit the current debt limit of $36.1 trillion.

‘Warning Sign’

The CBO’s latest forecasts present a “clear warning sign” that the United States is barreling toward “a debt ceiling breach,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a March 26 statement.

“We must raise the debt ceiling as soon as possible. A default would be a disastrous and unacceptable outcome,” MacGuineas said.

According to the head of the independent policy organization, lawmakers could integrate actions to raise the debt ceiling and reduce the national debt, “as they did with the Fiscal Responsibility Act and many other measures over the past several decades.”

The Biden–McCarthy agreement instituted limits on discretionary spending for defense and non-defense programs and aimed to reduce projected deficits by about $1.5 trillion over a decade.

Margaret Spellings, president and CEO of the Bipartisan Policy Center, said U.S. lawmakers have an opportunity to get “our fiscal house in order without risking the full faith and credit of the United States.”

“Fiscal responsibility is not just about avoiding financial calamity time and time again—it’s about ensuring economic stability and paying our bills on time,” Spellings said in a statement. “Policymakers must commit to responsible budgeting, which starts with avoiding debt limit brinksmanship and its impacts on our economy.”

Then-Treasury Secretary nominee Scott Bessent testifies before the Senate Committee on Finance at the U.S. Capitol on Jan. 16, 2025. Madalina Vasiliu/The Epoch Times

For years, the debt ceiling has been a political football, used by both sides of the aisle to enact each party’s agenda. The brinksmanship has come at a cost as debt limit standoffs have captured the market’s attention.

In 2023, Fitch downgraded its U.S. long-term credit ratings, and Moody’s trimmed its outlook to “negative” from “stable.” During the 2011 debt ceiling crisis, S&P cut its U.S. credit rating for the first time.

Fitch analysts cited the “erosion of governance” and increasing deficits as reasons for its downgrade nearly two years ago.

“In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the group said. “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management.”

The United States is now set for another showdown over the debt ceiling.

Republicans in both chambers may need to make concessions to their opponents from the Democratic Party if they plan to advance the president’s agenda.

President Donald Trump has advocated for abolishing the debt ceiling or extending it until 2029.

“The Democrats have said they want to get rid of it,” he said in a Dec. 19, 2024, phone interview with NBC News. “If they want to get rid of it, I would lead the charge.”