US Treasury Could Default As Soon As August, CBO Warns

The US Treasury's cash balance has significantly decreased, dropping by $480 billion in a month. This decline is due to the debt ceiling, which prevents the government from issuing new debt and forces it to use existing cash. The Congressional Budget Office (CBO) predicts the government could exhaust its funds by August or September 2025 if the debt limit isn't raised or suspended. Other estimates suggest the government might run out of money even earlier, potentially in May or June. The timing uncertainty stems from unpredictable tax revenues and the use of extraordinary measures. Republicans are aiming to pass significant tax cuts, possibly including a provision to raise the debt ceiling. However, this could involve cuts to Medicaid. Senate Republicans, less focused on spending cuts, are deliberating their tax plan. Democrats will likely demand concessions if forced to support a debt ceiling increase. This brinkmanship could cause market volatility, potentially leading to prioritization of payments to bondholders. House Democrats have stated they won't concede anything for free regarding the debt ceiling. This could create a very contentious scenario.