The Treasury is set to run out of cash in October, which may lead to a default on debt obligations or payment delays for government programs, according to a report from the Congressional Budget Office.
On March 15, 2017, the suspension of the debt limit expired and since then the Treasury has been able to borrow additional funds without violating the debt ceiling.
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"The Congressional Budget Office projects that if the debt limit remains unchanged, those measures will be exhausted and the Treasury will most likely run out of cash in early to mid-October," the report states. "The government would then be unable to pay its obligations fully, so it would have to delay making payments for its programs and activities, default on its debt obligations, or both."
The amount of money the government spends on programs and the amount it collects in taxes could change from the budget office projections, so the office warns that the Treasury could run out of funds even earlier.
Currently, the federal deficit stands at $693 billion, which is an increase of $134 billion than what it projected in January. The federal government has an outstanding debt of $19.8 trillion, which includes $14.3 trillion in public debt and $5.5 trillion held by government accounts.
Spending on major government programs such as Social Security and Medicare causes the amount of borrowing to increase. For example, payments to Medicare Advantage and Medicare Part D plans will total $23 billion, spending on Social Security benefits will total roughly $23 billion and funds for active-duty military and recipients of Supplemental Security Income will total roughly $25 billion.
According to the report, unless the debt limit is raised, the Treasury will not be able to issue additional debt.
"That restriction would ultimately lead to delays of payments for government programs and activities, a default on the government's debt obligations, or both," the budget office said. "CBO estimates that without an increase in the debt limit, the Treasury, by using all available extraordinary measures, would most likely be able to continue borrowing and have sufficient cash to make its unusual payments until early to mid-October of this year."