The Congressional Budget Office (CBO) has warned of a significantly increased risk that the US Treasury will run out of funds in early June due to lower-than-anticipated tax receipts through April. In response to questions from lawmakers, the CBO revised its previous projections, which estimated that the Treasury’s “extraordinary measures” would likely be exhausted between July and September 2023.
On January 19, 2023, the Treasury reached the statutory debt limit and announced a “debt issuance suspension period.” During this time, the Treasury can borrow additional funds without breaching the debt ceiling by employing well-established extraordinary measures under current law.
The CBO now expects that, after several years of pandemic-related disruptions, the Internal Revenue Service (IRS) will process tax returns more rapidly than last year. Consequently, fewer additional payments will be processed in May, and extraordinary measures will be exhausted sooner than previously projected. However, the exact exhaustion date remains uncertain due to the unpredictable nature of revenue collections and outlays in the coming weeks.
If the debt limit is not raised or suspended before the exhaustion of extraordinary measures, the government will be unable to pay its obligations fully, leading to delayed payments, defaulting on debt obligations, or both.
