CBO says Congress has until mid-October to raise the debt ceiling and avoid an economic disaster

Thomson ReutersSteve Mnuchin speaks at the SelectUSA Investment Summit in National Harbor in MarylandCongress will need to raise the nation's debt limit and avoid defaulting on loan payments by "early to mid-October," the Congressional Budget Office said in a report on Thursday.

Treasury Secretary Steve Mnuchin has encouraged Congress to raise the limit before the legislative body leaves for their August recess.

But it remains unclear if a bipartisan agreement has been struck to allow the limit to be raised, as both chambers continue to be weighed down by health care and tax reform and trying to find an agreement to fund the government after the September 30 deadline.

The CBO said that the "extraordinary measures" being used by the Treasury could exhaust themselves before their projected date if the money coming into the department via tax receipts slows down or federal outlays jump unexpectedly.

If an agreement to raise the debt limit is not reached, it would be a disaster for the global economy.

The US would likely see its credit rating decline, making it more expensive for the government to borrow in the future. Additionally, studies by the Treasury department after the 2011 debt ceiling fight showed that even approaching a default had a serious negative impact on financials markets.

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