The U.S. risks defaulting on its debts as early as July unless the borrowing limit is raised, the nonpartisan Congressional Budget Office said in a report on Wednesday.
The federal government on Jan. 19 reached its approximately $31.4 trillion debt ceiling -- which legally caps how much the U.S. can borrow to pay for what tax and other revenue doesn't cover -- and the Treasury Department has since been using "extraordinary measures" along with its current cash flow to keep the government's obligations paid.
"CBO estimates that under its baseline budget projections, the Treasury would exhaust those measures and run out of cash sometime between July and September of this year," according to the report.
The CBO projection adds urgency to an ongoing political dispute in Congress over the debt ceiling. Some Republicans in the House have resisted an increase of the debt limit unless Democrats agree to spending cuts. The Biden administration, however, has repeatedly said that it will not negotiate over the debt ceiling and that a discussion over spending should occur separately.
A default on U.S. debt could also shed 3 million jobs from the economy, drive up the cost of a 30-year mortgage by an average of $130,000 and shrink 401(k) savings for a typical worker near retirement by $20,000, according to a report from center-left think tank Third Way.
Speaking with "Good Morning America" last week, Treasury Secretary Janet Yellen called on Congress to raise the debt limit.
MORE: Biden and Republicans seem set for debt ceiling fight, reviving fraught political battles of years past"America has paid all of its bills on time since 1789, and not to do so would produce an economic and financial catastrophe," Yellen said. "Every responsible member of Congress must agree to raise the debt ceiling."
She added, "It's something that simply can't be negotiable."
Failure to raise the debt limit and the ensuing default on U.S. debt -- which have never happened before -- would cause immense harm to the U.S. and global economies, since the trustworthiness of U.S. Treasury bonds amounts to a cornerstone of domestic and international investment, economists and budget analysts previously told ABC News.
As confidence in U.S. borrowers falls -- in the case of a default -- interest rates on loans for some businesses would rise, slowing economic activity as the U.S. already faces elevated recession risk, the economists and analysts said. Moreover, the stock market would falter, threatening the retirement savings of millions of Americans.
Such an outcome would all but ensure a U.S. recession, the experts said.
Since yearly spending by the federal government exceeds tax revenue, the U.S. has accrued tens of trillions of dollars in debt, almost all of it in recent decades. The CBO said in its latest report that it projects the gross federal debt will grow by $19.6 trillion by the end of 2033.
In turn, Congress regularly passes a measure that allows the U.S. Treasury to increase the amount it can borrow. In some years, the debt-limit increase has become a political lightning rod, setting off debate over the nation's fiscal responsibility.
In 2011, for instance, congressional Republicans pressured then-President Barack Obama to agree to some spending cuts in order to win their support for a debt-limit hike.
If congressional gridlock obstructs a timely debt ceiling raise, the damage of a default would be severe, Daniel Bergstresser, finance professor at the Brandeis International Business School, previously told ABC News.
"A default on the debt would be a catastrophe for financial markets and a catastrophe for America's standing in the world," Bergstresser said.