The Treasury Department will exhaust its capacity to borrow in October or November if Congress fails to raise the debt ceiling, the nonpartisan Congressional Budget Office
(CBO) said Tuesday in its latest estimate.
The CBO noted that the borrowing authority under the debt limit is due to expire on March 15, but that Treasury could employ its "well-established toolbox of so-called extraordinary measures" to allow for a short period of additional borrowing.
"The Congressional Budget Office projects that those measures would probably be exhausted and the Treasury would probably run out of cash in October or November; however, the timing and magnitude of revenues and outlays over the next several months could vary noticeably from CBO’s projections, so the date on which those measures would be exhausted and the Treasury would run out of cash could occur earlier or later," the CBO stated.
Those measures could include deferring investments into federal employee retirement funds.
The last time a Republican Congress had to raise the debt limit without any help from Democrats was in 2006, but the GOP has not settled on how it will approach negotiations and what demands it will place on the administration in exchange for raising the debt ceiling.
"These conversations are really in their nascent stage. I don’t know what we will ultimately decide," House Budget Committee Chairman Tom Price told Politico
Price said he would like to see the size of any increase be offset by spending cuts, which was the deal cut in 2011. However, since then, President Barack Obama has refused to accept anything but a clean debt ceiling increase, reports Bloomberg News.
Negotiations over the debt ceiling could be further complicated by several factors, including the fact that the limit will be reached just as the 2016 presidential primary race heats up.
The recent compromise reached by GOP leadership in the House over Department of Homeland Security (DHS) funding also left conservatives angry.
"It’s very possible that come September, you could face this again," Rep. Joe Pitts, a Republican from Pennsylvania, told Reuters
when asked about the prospects of looming debates over the debt and spending.
Analysts believe that House Speaker John Boehner's difficulty in securing funding for the DHS has left him weakened and provides a glimpse of what may come as Congress debates the debt ceiling, as well as funding for the government in general.
"The more conservative voices in the House essentially threw a wrench into Boehner's efforts to get DHS funding going, and I think maybe this serves as a litmus test for what they can do in the fall," Robbert Van Batenburg, director of market strategy at the brokerage firm Newedge, told CNN
As Alan Blinder, a Princeton University economics professor and former vice chairman of the Federal Reserve, said in The Wall Street Journal
last month, DHS funding is only one of several looming battles over the budget and government spending.
"In May the highway bill expires, and the highway trust fund is projected to run out of cash," Blinder wrote in the Journal opinion piece.
"The good news is that politicians are already talking about ways to stave off disaster. The bad news is that they will most likely keep on talking until the last minute — or later."
Blinder also noted that Oct. 1 marks the beginning of a new fiscal year and the possibility of additional sequester cuts.
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