US could run out of cash by May, budget office predicts

Washington: The US 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 Wednesday.

The forecast puts added pressure on Congress and the Trump administration to address the borrowing cap, which restricts the total amount of money 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 Donald Trump's plans to enact more tax cuts.

The CBO 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 US 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 CBO's projections," the budget office said in a report.

The exhaustion 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 US has never defaulted on its debt 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.

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.

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.