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CBO says US to hit debt limit around early November

The United States will hit its legal borrowing limit and run out of cash around the first two weeks of November, the independent Congressional Budget Office said Tuesday.

With Congressional Republicans and the White House girding for yet another battle over borrowing to finance the deficit, CBO director Douglas Elmendorf said the government could be forced into sudden cuts or defaulting on its debt as early as six weeks from now.

Based on expected cash flows, he told reporters, "We think that the Treasury will probably run out of cash sometime between the end of October and mid-November, without some changes in the borrowing limit."

A political stalemate over fiscal policy has locked the government’s debt ceiling at $16.7 trillion since early this year.

The Treasury until now has been able to operate under that level, but spending commitments mean that by the end of October it will need to borrow more or default on obligations.

In August 2011, a battle over the ceiling nearly forced the government to default on its debt and, despite a last-minute deal between Republicans and the White House, led to the first-ever downgrade of the US credit rating, by Standard & Poor’s.

Earlier Tuesday, Treasury Secretary Jacob Lew -- who has said the money could run out as early as mid-October -- warned that another fight over the budget and raising the ceiling could damage the economy.

"The repercussions could be serious," he told the Economic Club of Washington.

"Meeting our nation’s financial obligations -- including Social Security and Medicare benefits, payments to our military and veterans, and contracts with private suppliers -- will be put at risk."

"Failing to meet our financial obligations should be an unthinkable event. Never in our history has the United States defaulted on our debt obligations," he said.