The U.S. Treasury Department could run out of money by the end of September unless the Congress takes action to either extend the suspension of debt limit or increase the limit, the Congressional Budget Office (CBO) said Tuesday.
Currently, there is no statutory limit on the issuance of new federal debt as Congress had previously agreed to suspend the debt limit through March 1.
Unless additional legislation comes into effect, the Treasury would have to declare a "debt issuance suspension period" and to take "extraordinary measures" to borrow additional funds without breaching the debt ceiling.
"With a large inflow of tax revenues in April, those extraordinary measures would enable the Treasury to continue financing the government's activities for several months," the CBO said in a statement.
"However, if the debt limit remains unchanged, the ability to borrow using those measures will ultimately be exhausted, and the Treasury will probably run out of cash near the end of this fiscal year or early in the next one," the CBO said. The federal government's fiscal year ends Sept. 30.
"If that occurred, the government would be unable to pay its obligations fully, and it would delay making payments for its activities, default on its debt obligations, or both," the CBO said.
Federal Reserve Chairman Jerome Powell told Congress in a testimony Tuesday that it would be "a very big deal" for the U.S. government not to pay all the bills when and as due.
"It's beyond even consideration. The idea that the U.S. would not honor all of its obligations and pay them when due is something that can't even be considered," the central bank chief said in response to a question.
The debt ceiling was previously set at 20.5 trillion U.S. dollars, and Congress voted in February 2018 to suspend the debt limit through March 1 this year as part of a bipartisan budget deal.
The national debt has reached a record high of more than 22 trillion U.S. dollars, according to data released by Treasury Department earlier this month.
It's a "widely agreed" fact that the federal government debt is on an unsustainable path, Powell said.