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Debt-Limit Crunch Time, and Risk of Default, Hit as Early as July, CBO Says

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The federal government could lose the ability to pay all of its bills on time as early as July if the debt limit isn’t raised, the Congressional Budget Office said Wednesday.

The government already reached its $31.4 trillion debt limit in January, and Treasury Secretary Janet Yellen warned Congress that the U.S. could use extraordinary maneuvers to continue to meet its obligations but only until around June.

“If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government would be unable to pay its obligations fully,” the CBO said. “As a result, the government would have to delay making payments for some activities, default on its debt obligations, or both.”

The CBO, a nonpartisan agency, estimates the government’s ability to borrow using extraordinary measures will be exhausted between July and September, in the fourth quarter of the current fiscal year. The timing is dependent on a number of factors, including tax revenue, it said.

“The projected exhaustion date is uncertain because the timing and amount of revenue collections and outlays over the intervening months could differ from CBO’s projections,” the CBO said.

(This is a developing story. Check back soon for more details.)

Credit: marketwatch.com

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