CBO projects when US government will ‘run out of cash’

close video WATCH LIVE: CBO holds presser as debt ceiling debate reaches fever pitch

The American economy hangs in the balance.

The U.S. will default on its debt sometime this summer if Congress doesn't act and raise the $31.4 trillion debt limit, the Congressional Budget Office projected Wednesday.

"We project that, if the debt limit remains unchanged, the government’s ability to borrow using extraordinary measures will be exhausted between July and September 2023," CBO director Phillip Swagel said Wednesday in a statement.

A report from the CBO released Wednesday further stated, "Currently, the statutory limit on the issuance of new federal debt is set at $31.4 trillion. On January 19, 2023, debt reached that limit, and the Treasury announced a ‘debt issuance suspension period,’ during which, under current law, it can take well-established 'extraordinary measures' to borrow additional funds without breaching the debt ceiling." 

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Congress needs to raise the debt ceiling or else the U.S. could default on debt by the summer, the Congressional Budget Office said Wednesday. (AP Photo/Patrick Semansky, File / AP Newsroom)

"CBO estimates that under its baseline budget projections, the Treasury would exhaust those measures and run out of cash sometime between July and September of this year. The Deficit Control Act requires CBO to project spending," the office said. 

The Treasury Department has resorted to "extraordinary measures" to avoid sovereign default, and Treasury Secretary Janet Yellen gave Congress an "early June" deadline to negotiate with President Biden to raise the debt limit.

If the U.S. fails to raise the debt ceiling, the government may be forced to temporarily default on some of it spending obligations, which Yellen has previously warned would carry severe negative economic consequences. Interest rates would likely spike, and demand for Treasuries would drop; even the threat of default can cause borrowing costs to increase, according to the Committee for a Responsible Federal Budget.

While the U.S. has never defaulted on its debt before, it came close in 2011, when House Republicans refused to pass a debt-ceiling increase, prompting rating agency Standard and Poor's to downgrade the U.S. debt rating one notch. Republicans have pushed for spending cuts before they will agree to raise the debt ceiling.  close video The debt limit ‘will get worked out,’ says Mick Mulvaney

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Some are not willing to go that far. 

"We cannot raise the debt ceiling," Rep. Andy Biggs, R-Ariz., tweeted in January. "Democrats have carelessly spent our taxpayer money and devalued our currency. They’ve made their bed, so they must lie in it."

Fox Business' Chris Pandolfo contributed to this report.