WASHINGTON – The government could run out of cash to pay its bills in full and on time sometime between the end of October and the middle of November if lawmakers fail to increase its $16.7 trillion borrowing cap, Congressional Budget Office Director Doug Elmendorf said Tuesday.
Elmendorf told reporters that the Treasury Department’s assessment that it will run out of borrowing authority and have just $50 billion in cash on hand in mid-October “sounds plausible.”
The government has never defaulted on its obligations.
Treasury Secretary Jacob Lew said Tuesday that Congress needs to act to increase the debt limit by mid-October, but he warned Republicans that President Obama will never go along with their demand to derail implementation of the new health care law as part of a measure to fund the government or increase the debt limit.
“Efforts to either defund or delay the Affordable Care Act are unacceptable,” Lew told the Economic Club of Washington. “That is not a path towards something that can ultimately be signed into law.”
Elmendorf also said the CBO’s estimate in May that the government will run a $642 billion deficit this year is proving a little too optimistic. He said that slightly weaker revenues than expected will likely push that figure higher but that the final deficit tally for the 2013 budget year ending Sept. 30 will still register below $700 billion.
Elmendorf made his remarks as the CBO released an updated study of the government’s long-term budget ills. It says that federal health care and retirement programs threaten to overwhelm the federal budget and harm the economy in coming decades unless Washington finds the political will to restrain the two programs’ inexorable growth. The long-term pressures promise to quickly reverse recent improvements in the deficit.
The CBI report says government spending on health care and Social Security would double relative to the size of the economy in 25 years and that spending on other programs like defense, transportation and education would decline to its smallest level relative to the size of the economy since the Great Depression.
The share of federal spending devoted to health care would rise from 4.6 percent of gross domestic product today to 8 percent in 2038; spending on Social Security would rise as well, as the number of people receiving benefits increases to more than 100 million in 25 years, compared with 57 million people taking benefits now.