The Congressional Budget Office (CBO) of the United States has reported that if action is not taken on the debt limit, the government’s borrowing capacity, maintained through exceptional measures, could be exhausted in August or September. The CBO published the “Federal Debt and Legal Limit” report. The report pointed out that the current debt limit of 36.1 trillion dollars has already been reached by the US Treasury, and if the limit remains unchanged, the government’s borrowing ability, sustained through exceptional measures, could be exhausted in August or September. The report mentioned that the exact date is uncertain, as differences in revenue collections and expenses from CBO forecasts could occur in the intervening months. The report stated that if the debt limit is not increased or suspended before the exceptional measures are exhausted, the government would not be able to meet its obligations, resulting in delays in some payments, failure to meet debt obligations, or a combination of both.

WHAT DOES THE DEBT LIMIT MEAN?
The debt limit in the US refers to the “total amount of money that the US government is authorized to borrow to fulfill its current legal obligations.” The US Treasury is authorized to borrow until the Congress’ specified limit is reached. When the debt limit is reached, the federal government cannot increase the amount of debt, but can only spend cash on hand and incoming revenues. To increase the limit, approval must be obtained from Congress. The federal government in the US last reached the $31.4 trillion debt limit in early 2023. Following months of negotiations in the US Congress, the debt limit was suspended until January 1, 2025 in June 2023. Extraordinary measures had already been initiated to prevent surpassing the current debt limit of $36.1 trillion by the US Treasury.