The United States could default on its debt as early as June, the Treasury secretary said Monday. Janet Yellenas politicians tussle over raising the government’s borrowing limit.
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Last week, Republicans voted to raise the national debt limit but with drastic budget cuts, as they sought to confront Democratic President Joe Biden over “excessive” spending.
Republicans were determined to push the Limit, Save and Grow Act through the lower house of Congress to bolster their position in negotiations with Biden, who has refused to accept spending cuts.
But the rule has no chance of becoming law as Democrats, who control the Senate and the White House, oppose it. Although the United States reached its debt limit of $31.4 trillion in January, the Treasury took extraordinary measures that allow it to continue financing government activities.
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If the debt ceiling is not raised or suspended by Congress before the current one runs out, the government risks defaulting on its payment obligations, with profound implications for the economy.
“Our best estimate is that we will be unable to continue to meet all government obligations in early June, and potentially as soon as June 1, if Congress does not raise or suspend the debt limit before then,” he said. Yellen in a letter to House Speaker Kevin McCarthy.
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“Given current forecasts, it is imperative that Congress act as soon as possible to raise or suspend the debt limit to provide longer-term certainty that the government will continue to meet its payments.Yellen stated.
Biden-McCarthy conversation
The White House reported Monday that Biden had called McCarthy earlier that afternoon to invite him to a May 9 meeting with the other top Republican and Democratic leaders in Congress.
A source familiar with the negotiations told AFP that Biden spoke with McCarthy on Monday about expanding the national debt and avoiding a default. As head of the narrow Republican majority in the House of Representatives, McCarthy has primary control over America’s budget issues.
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In a statement released Monday, McCarthy accused Biden of “Threaten to push our nation into its first default.” He called on the president and the Senate “to get to work, and soon” to accept spending cuts and avert crisis. In an earlier letter, Yellen said the cash and extraordinary measures were unlikely to run out before early June. He added on Monday that the latest expectations are based on currently available data, noting that the actual date on which the Treasury exhausts its measures could be “several weeks later” than the early June estimate.
Risk
“Because tax revenue through April has been lower than the Congressional Budget Office (CBO) anticipated in February, we now estimate there is a significantly higher risk that the Treasury will run out of funds in early June,” said the director of that office, Phillip Swagel, in a separate statement Monday.
In an earlier report, the CBO projected that the extraordinary measures would likely run out between July and September, although it also acknowledged uncertainty in its forecasts. “House Republicans are running out of time to avert an economic catastrophe of their own making,” said Brendan Boyle, top Democrat on the House Budget Committee.
“Today’s update from the Treasury Department has to be a wake-up call for Chairman McCarthy,” he added, saying the president has “wasted enough House time” appeasing his extremist allies. But House Republicans, in a tweet after the Treasury announcement, reaffirmed the need to “limit Washington spending.”
AFP
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