Already a number of problems have grabbed US economy – hitting the debt ceiling, slowdown, layoffs. Now, add another to this list, since funds of US Treasury running dry says CBO. The US government will be unable to meet the financial liabilities after June 2023.
U.S. Congressional Budget Office (CBO) states in its May 12 report that The U.S. government faces a potential risk of defaulting on its debt in the near future due to the approaching statutory debt limit of $31.4 trillion, which is expected to be reached on January 19. If the debt limit is not raised, there could be serious consequences as early as June.
“CBO projects that if the debt limit remains unchanged, there is a significant risk that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations, “it states.
CBO has revised its initial estimate from February and now predicts that the federal budget deficit for 2023 will be $1.5 trillion, exceeding the earlier estimate by $100 billion.
It highlighted that until April, fall in tax receipts from US citizens is responsible for depletion of funds. It has the potential to result in a larger deficit than originally anticipated. The report also stressed that the ongoing Supreme Court case regarding the cancellation of outstanding student loan debt could greatly impact the overall revenue for the year 2023.
Though uncertainty lingers at the back of this projection. If revenues fell short of projections, the deficit would grow and consequently increase the debt this year. However, if the deficit decreased due to a ruling in the student loan case, the amount of debt in 2023 would remain relatively stable and not undergo significant changes.
The impact of the revenue shortfall and the court decision against canceling student loan debt would mostly balance each other out.
Assuming everything else remains constant, the decrease in revenues and the subsequent increase in interest expenses up until April would cause the 2023 deficit to be approximately 1.0 percent of GDP higher than the projection made by the CBO. Conversely, if the cancellation of student loan debt is deemed invalid and the expenses recorded in 2022 are reversed this year, the 2023 deficit would be reduced by more than 1.0 percent of GDP, assuming no other changes.
Thus, funds of US Treasury running dry says CBO, and this could pose serious threat to the economy. However, not everything is so gloomy. According to the projected data from the CBO, there is no expected reduction in the growth of the deficit in the foreseeable future.
The CBO’s predictions indicate that annual deficits will almost double over the next ten years, reaching $2.7 trillion by 2033. The CBO anticipates that 2033 will mark the highest recorded level of national debt in the history of the United States.
Source: CBO Report