The U.S. government is apparently in financial trouble, according to a report released by the Congressional Budget Office.
According to the report, the government could run out of money for Social Security payouts and military paychecks as early as summer. There has been a lot of debate in Congress about whether or not to raise the debt ceiling, but unless there’s a unanimous vote to do so, the Treasury will no longer be able to afford its obligations to Social Security, military, as well as other benefits.
The U.S. Treasury Secretary, Janet Yellen, made it clear that if the government defaults, it would be “catastrophic” for America. “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,” she said.
Defaulting would mean that prices would continue to rise for Americans, specifically home and auto loan rates and credit card rates. House Speaker Kevin McCarthy made it clear that Republicans have no intention of allowing the government to default on its debts. He did add, however, that the votes wouldn’t be free.
He said in exchange, the party demands federal spending cuts and they will not pass the “clean debt ceiling” that the Biden Administration is pushing for.
At the National Association of Counties conference in Washington, Biden gave a speech where he also used the word “catastrophic” to describe the state of the U.S. should the government default. “Even coming close to default would raise borrowing costs, making it harder to finance key projects in your communities,” he said.
The debt ceiling, also known as the debt limit, is the amount that the United States government can legally borrow. Because the government has so many expenses and runs on a deficit, borrowing money is necessary to meet the significant demand. On January 19, 2023, the United States hit the $31.4 trillion debt ceiling.
The Treasury had no choice but to take “extraordinary measures” to borrow additional money.
By this summer, however, the ability to access those extraordinary measures will dry up. The exact date is still up in the air and depends on how much revenue the government will be able to collect from April’s tax collections. Phillip Swagel is the director of the Congressional Budget Office.
He issued a warning in his report, saying that if the tax receipts fall short of the estimated amounts, the extraordinary measures could dry up much sooner than originally predicted. Swagel said they could be exhausted as early as July if the U.S. isn’t able to bring in enough revenue.
The CBO has predicted that there will be a rise in unemployment, stable or rising interest rates, and stagnant output throughout the country. The future looks bleak at the moment, but slowing inflation and a potential economic rebound in the future are a ray of hope in these times of struggle.
This article was produced and syndicated by Wealth of Geeks.