Report: US Could Default as Soon as July

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Facts

• The US Congressional Budget Office (CBO) on Wednesday predicted that unless the current $31.4T cap on borrowing — which the US reached on Jan. 19 — is raised or suspended, the Treasury Department will no longer be able to pay all of its bills sometime between July and September this year.¹
• The final projection will be determined by tax revenues received in April, with the CBO warning that if they don't meet expectations, a default could occur before July.²
• The CBO also changed its prediction on the size of the annual federal budget deficit over the next decade, jumping 20% to $18.8T from $15.7T in May.²
• The decision to raise the debt limit has been at a deadlock, with the new GOP-majority House requesting that it be accompanied by spending cuts — a measure the Biden admin. and Democrats in Congress have declined.³
• This comes a day after US Treasury Sec. Janet Yellen warned that a debt default would cause a 'catastrophe,' including failing to pay millions of social security beneficiaries and military members, despite initiating 'extraordinary measures' since Jan. 19.⁴
• The CBO cites factors such as social security, Medicare, veterans benefits, and future interest payments as reasons for the growing debt and also predicts that incoming tax revenue won't keep pace with the rising prices. Pres. Biden is expected to detail his budget plan on March 9 and has called on Republicans to lay out their own proposals.²

Sources: ¹Reuters, ²CNBC, ³Wall Street Journal and ⁴NPR Online News.

Narratives

• Democratic narrative, as provided by Jacobin. Republicans are holding the debt ceiling hostage in order to dismantle American welfare programs. Though raising the debt ceiling isn't a big deal in comparison to the repercussions of doing nothing, the new GOP majority is only too happy to continue with a stalemate as a government closedown will favor them. It's likely that the US will once again take a ride on the same stopgap merry-go-round as always, to the detriment of average Americans.
• Republican narrative, as provided by The western journal. The chief financial officer of the US is begging Congress to increase the nation's credit line because lawmakers continually spend more money than they have. Democrats have been likened to an out-of-control child with a credit card, already having given nearly $100B to Ukraine while Americans struggle to pay for gas and groceries. Hopefully, this emergency will serve as a wake-up call to those in power to manage the nation's finances responsibly.

Predictions