CBO says Treasury could run out of cash in early March

The Congressional Budget Office said Wednesday the government will most likely run out of cash to pay its bills in the first half of March unless Congress raises the federal borrowing limit.

CBO previously had projected Treasury would run out of cash in "late March or early April," but said the effects of the new tax law caused it to move up its projection.

The IRS released updated withholding tables last month to reflect changes in the new tax law that it said would boost paychecks for about 90% of American workers starting in February. But the reduced revenue means Treasury will likely have less room to maneuver before it runs out of cash and becomes unable to make on-time payments on its obligations to bondholders and other federal programs, such as Social Security, Medicare and veterans benefits.

CBO now estimates that, starting in February, individual income tax withholding will be roughly $10 billion to $15 billion less per month than previously expected.

"Consequently, withheld receipts are expected to be less than the amounts paid in the comparable period last year," CBO said Wednesday. "In addition, the government ran a deficit of $23 billion in December, and it normally runs a deficit in the second quarter of the fiscal year."

The Treasury Department has been employing extraordinary measures to keep paying the government's bills since Dec. 8, when a temporary suspension of the debt limit expired.

Treasury said Wednesday it has enough room to keep making on-time payments "through the end of February," but urged lawmakers to "promptly" raise the borrowing limit, or debt ceiling. Congress is expected to address the debt limit in a government spending bill, but it's not yet clear when.

"I respectfully urge Congress to act as soon as possible to protect the full faith and credit of the United States by increasing the statutory debt limit," Treasury Secretary Steven Mnuchin told lawmakers at a Senate hearing Tuesday.

Write to Kate Davidson at kate.davidson@wsj.com