The Congressional Budget Office projects that the U.S. Department of Treasury will run out of money to pay the U.S. government’s bills in October. The CBO outlined this reality in a report titled, “Federal Debt and the Statutory Limit, June 2017.” The CBO forecast the deficit for 2017 to be $559 billion in January of 2017, but have adjusted the expected deficit for 2017 to $693 billion. This is a result of the CBO increasing its estimates of the Treasury’s borrowing needs.
With the current debt ceiling laws in place, the CBO fully expects that the federal government will be forced to delay payment for federal activities and programs, or fully default on its debt obligations. U.S. Treasury Secretary Steven Mnuchin has stringently requested for the U.S. Congress to increase the debt ceiling prior to their August recess. As of March 16, the U.S. Department of Treasury has been operating using extraordinary measures.
The fiscal quagmire is further exasperated by Federal Reserve Chair Janet Yellen’s recent decision to raise interest rates. Kathy Jones, senior fixed income strategist at Charles Schwab, remarked, “The combination of a rate hike and shrinking the balance sheet equates to a tightening monetary policy at a time when inflation is lower than expected.”
The U.S. national debt is currently $19.9 trillion dollars and counting. Federal debt is expected to rise from $20.188 trillion at the end of fiscal 2017 to $21.221 trillion at the end of fiscal 2018. In the New York Times, Alan Rappeport commented, “expectations of rising interest rates could make it even harder to chip away at the debt.”
In the wake of the CBO announcement, Rep. Dianne Black (R-Tenn.), chairwoman of the House Budget Committee, issued a statement saying, “Our country was already facing daunting fiscal challenges and they just got even worse. It’s time to pass a budget that addresses the true driver of our debt – mandatory spending.”
— House Budget GOP (@housebudgetGOP) June 30, 2017
Despite the fiscal pleas for the debt ceiling to be raised by the CBO, Trump administration, and U.S. Department of Treasury, 57 percent of registered voters oppose the debt ceiling increase. These findings were the result of a Morning Consult-Politico poll released on June 23, 2017.
The CBO projects that the federal debt held by the public is expected to reach $25.5 trillion by the year 2027.
[Featured Image by Chip Somodevilla/Getty Images]