The Congressional Budget Office (CBO) reported that if action is not taken on the debt limit, the government’s ability to borrow using extraordinary measures could be exhausted in August or September. The CBO released a report titled “Federal Debt and Legal Limit.” The report pointed out that the current debt limit has already reached $36.1 trillion, and if the limit remains unchanged, the ability to borrow using extraordinary measures could be exhausted in August or September. The report also mentioned that the exact date is uncertain as revenues and expenditures in the intervening months may differ from CBO’s projections. The report warned that if the debt limit is not increased or suspended before the extraordinary measures are exhausted, the government may not be able to fulfill its obligations, leading to delayed payments, failure to meet debt obligations, or both.

WHAT DOES THE DEBT LIMIT MEAN?
In the US, the debt limit refers to the total amount of money the US government is authorized to borrow to fulfill its existing legal obligations. The US Treasury is allowed to borrow until the limit set by Congress is reached. Once the limit is reached, the federal government cannot increase its debt amount and can only spend available cash and incoming revenues. To raise the limit, Congress must pass a law granting permission. The federal government in the US last reached a debt limit of $31.4 trillion in early 2023. After months of negotiations in Congress, the debt limit was suspended until January 1, 2025, in June 2023. Extraordinary measures were already being implemented to prevent exceeding the current $36.1 trillion debt limit of the US Treasury.