The federal government of the United States could literally run out of money sometime in the next two months, Congressional Budget Office Director Elemendorf has warned. The gloomy assessment also was made by the CBO in a recent study.
The $16.7 trillion federal debt ceiling – the amount of money that Uncle Sam can borrow under law — needs to be increased or the government will run out of cash, Elemendorf said. Congressional approval is needed to raise the debt ceiling.
The Republican-controlled House of Representatives is willing to raise the debt ceiling but only if the legislation raising the ceiling defunds Obamacare. The House even passed such a measure on Friday. Democrats who control the Senate, though, say they will not go along with the measure – and even if they did, President Obama would veto it.
The government would run out of money sometime between the end of October and the middle of November, leading to default on its loans.
Current Federal Spending Unsustainable
The real problem identified by the CBO report is that the current level of federal spending is unsustainable, with the federal government spending more money than it brings in through taxes. It gets worse: The Congressional Budget Office predicts that spending on health care and Social Security could double within 25 years.
“The unsustainable nature of the federal government’s current tax and spending policies presents lawmakers and the public with difficult choices,” CBO said. “To put the federal budget on a sustainable path for the long term, lawmakers would have to make significant changes to tax and spending policies.”
The United States apparently is entering into a period of permanent fiscal crisis that is threatening its economic future.
Government will run out of Money within Ten Days
President Obama has threatened to veto any measure that contains language that defunds the Affordable Care Act (Obamacare). The worst part of this dispute is its’ potential effect on the overall economy.
“Economists are warning that the danger of a government shutdown or debt default could seriously damage the U.S. economy,” Guardian journalist Paul Lewis wrote.
How the Budget Crisis can Harm Average People
There are several ways in which this fiscal crisis could theoretically harm average Americans. The impacts on average people could include:
- The suspension of federal payments that many average Americans depend on for all or part of their income. This could include Social Security, Unemployment Insurance, Veterans Pensions, disaster relief and agriculture subsidies.
- Panic on the stock market and a fall in stock values which will cut many Americans’ retirement income.
- The collapse of the international bond market because the value of US Treasury bonds could be destroyed. Warren Buffett has warned that owners of long-term bonds which include many retirement funds could see big losses.
- An increase in interest rates which could make mortgages and other loans too expensive for average Americans to purchase.
- Inflation which could destroy the value of the US dollar and many Americans’ investments.
- Massive cuts in federal spending which could lead to layoffs of large numbers of government employees and employees working as contractors. That could lead to higher unemployment.
- The inability of the US government to issue bonds. If that occurs the only way the federal government will be able fund its operations will be to increase taxes. Attorneys for the Standard & Poor’s ratings agency have alleged that the Justice Department filed a $5 billion lawsuit against the company because it warned of this danger.
- Increased taxation that could cut into the income of average Americans.
- A prolonged economic crisis and social unrest like that seen in European countries like Greece in recent years.