U.S. Could Run Out of Cash by May, Budget Office Predicts

New York Times

26-03-2025

The U.S. could run out of money to pay its bills by late May if Congress does not raise or suspend the nation's debt limit, the Congressional Budget Office said on Wednesday.
The forecast puts added pressure on Congress and the Trump administration to address the borrowing cap, which restricts the total amount of money that the United States is authorized to borrow to fund the government and meet its financial obligations. A protracted standoff later this year could rattle markets and complicate President Trump's plans to enact more tax cuts.
The C.B.O. noted that its forecast is subject to uncertainty over how much tax revenue the federal government will collect this year. It expects that the United States will have sufficient funds to keep paying bills through August or September. However, it said that if borrowing needs exceed its projections, the U.S. could run out of cash by late May or sometime in June.
'The projected exhaustion date is uncertain because the timing and amount of revenue collections and outlays over the intervening months could differ from C.B.O.'s projections,' the budget office said in a report.
The so-called X-date is the moment when the United States is unable to pay its bills, including interest payments to investors who hold government debt. Failure to meet those obligations could result in the United States defaulting on its debt. The U.S. has never defaulted on its debt, which is considered one of the safest investments in the world, and brinkmanship over missed payments could be economically damaging.
The national debt is now approaching $37 trillion. Lawmakers agreed in June 2023 to suspend the $31.4 trillion debt limit until Jan. 1, 2025.
Janet L. Yellen, the Treasury secretary under President Joseph R. Biden Jr., told Congress in mid-January that the Treasury Department would need to start using 'extraordinary measures' on Jan. 21 to allow the United States to keep meeting its financial obligations.
Those measures are essentially accounting maneuvers that can prevent the government from breaching the debt limit. They can include suspending certain types of investments in savings plans for government workers.
But eventually the Treasury will exhaust those maneuvers, and the debt limit will need to either be lifted or suspended in order for the federal government to continue funding its obligations
Because the federal government runs budget deficits — meaning it spends more than it brings in through taxes and other revenue — it must borrow huge sums of money to pay its bills. Those obligations include funding for social safety net programs, salaries for members of the armed forces and paying investors who have bought U.S. government debt in exchange for interest payments.
Republicans have been cutting federal jobs at government agencies and expressed a commitment to curbing wasteful spending. But those efforts are unlikely to make much of a dent given that the biggest drivers of the debt are social safety net programs like Medicare and Social Security. Lawmakers have shown little appetite for cutting those politically popular programs.
Before taking office this year, Mr. Trump called for abolishing the debt limit and warned that it was a trap left by Democrats to derail his agenda.
The C.B.O. estimate follows a projection earlier this week by the Bipartisan Policy Center, which said that the United States could run out of cash sometime between mid-July and early October.
Turmoil at the Internal Revenue Service — including pushing out thousands of probationary employees — has stalled audits and hampered its efforts to collect taxes, according to agency officials, raising concerns that the government may collect less tax revenue this year than expected.
Treasury Secretary Scott Bessent told lawmaker this month that he plans to provide Congress with an X-date forecast in May.