Washington — Treasury Secretary Janet L. Yellen said on monday If Congress doesn’t introduce or stop the bill, the U.S. could run out of money to pay the bill by June 1. debt limitpressuring President Biden and lawmakers to reach a speedy deal to avoid a default on the country’s debt.
A More Precise Warning About When The US Might Strike So-called X date This will significantly reduce the expected time for lawmakers to reach an agreement before the government runs out of money to pay all bills on time. The new timeline could rush negotiations over government spending between the House, Senate and Mr. Biden. Alternatively, there could be a dangerous confrontation between the president and House Republicans who refused to raise the limit without significant spending cuts.
Biden called the top four leaders in Congress on Monday and asked them to meet on May 9 to discuss financial issues. The president reached out to House Speaker Kevin McCarthy, Minority Rep. Hakeem Jeffries, and Majority Senator Chuck Schumer. Kentucky Sen. Mitch McConnell, minority leader.
Economists say failure to raise the debt ceiling that caps the total amount the US can borrow shake up financial markets plunge the world economy into a financial crisis.
Because the US is running a budget deficit, or spending more money than it earns, it has to borrow a lot to pay its bills. In addition to paying the salaries of military and government employees, the United States must make interest and other payments to bondholders who own the debt, in addition to paying Social Security benefits.
Ministry of Finance previously predicted Cash could run short in early June, but new estimates cast a worrying outlook that the U.S. could be unable to make some payments, including to bondholders, in the coming weeks. I am proposing
“Given the current outlook, it is imperative that Congress act to raise or stop the debt limit as soon as possible in a way that provides long-term certainty that the government will continue to pay,” Yellen said. ‘ said. in a letter to Congress.
The Congressional Budget Office warned Monday that time was running out sooner than previously thought. said it was unlikely to have a significant impact.
“That, combined with lower-than-expected earnings through April, means that the Treasury Department’s special measures will be used up sooner than previously forecast,” said CBO director Philip Swegel. wrote in an analysis published on the agency’s website.
White House officials didn’t expect the day of possible default to come so soon.
Biden continues to insist he will not negotiate directly over the limit, saying Congress must do so without conditions. But he is preparing to meet with Democratic and Republican leaders, including McCarthy, at the White House to discuss taxes and spending. Many administration officials have expressed optimism that these talks could result in a financial deal and even raise the debt ceiling.
The newly reduced calendar leaves little time for the president and congressional leaders to reach agreement on raising limits. McCarthy is traveling in the Middle East this week. Mr. Biden will attend the G7 summit in Japan later this month before traveling to Australia for summits with the leaders of Japan, India and Australia.
House Republican Bill passed in April It would raise the debt ceiling in exchange for significant spending cuts and roll back the recent climate change bill Democrats passed along party lines. Biden has lashed out at the bill, saying it will benefit the oil and gas industry while hurting working families, and accusing Republicans of endangering the U.S. economy.
On Monday, the president called on Republicans to “make sure the Speaker of the House’s threat of default on the debt is eliminated.”
“In more than 200 years, America has never failed to pay its debts. Put in the capital, colloquially speaking, America is not a deadbeat nation. It has never failed to pay its debts. ‘ said Biden.
Republican senators reacted to the news on Monday, stressing that Biden is responsible for negotiating to avoid economic catastrophe.
“It’s very scary,” said Joni Ernst, an Iowa senator and member of the Republican leadership, of the impending crisis. “President Biden needs to step it up and get to the table. Kevin McCarthy and the people at home have done their part.”
Some were optimistic that the looming deadline would force action.
“Washington is at its best when it has a deadline to respond,” said Senator Tom Tillis, a Republican from North Carolina.
Schumer and Jeffries called on Republicans to lift the restrictions immediately without conditions. Lawmakers said in a joint statement on Monday, “Until June 1, we will stand united and pass clean legislation to avoid debt defaults and prevent devastating consequences for the economy and millions of American families. We cannot afford to wait for
Even the most ardent supporters of fiscal reform say the debt ceiling must be raised, while there is bipartisan consensus that the country needs to find ways to narrow the spending-collection gap.
“The debt ceiling needs to be raised as soon as possible without drama or significant risk of default,” said Maya McGinius, chairman of the Responsible Federal Budget Committee. “The threat of default or the limp is the height of irresponsibility. Lawmakers need to start a serious debate immediately.”
With debt defaults likely to occur by June 1, Congress will be forced to agree to a short-term increase or suspension of the debt ceiling to provide more time for negotiations. There is a possibility. But even that temporary relief is far from certain, given competing factions within the Republican Party.
US technically hit $31.4 trillion debt limit in Januaryforced the Treasury Department to adopt an accounting operation known as the Temporary measures So that the government can continue to pay its bills, including payments to bondholders who own government debt. Yellen said at the time that her powers to delay defaults (if the U.S. doesn’t pay on time) could be exhausted by early June. However, she cautioned that her estimates are fraught with considerable uncertainty.
Tax revenue depends on a complex array of factors, including unemployment rates, wages and whether taxpayers file their returns on time. On Monday, the Treasury Secretary underscored the difficulty of predicting default dates, noting that the new estimates are based on currently available data, such as tax payments from individuals, which are inherently variable.
“The actual date for the Treasury Department to take special action could be several weeks later than these estimates,” Yellen said.
Biden said he would meet with McCarthy to discuss government spending and the budget. But he argued that raising the debt ceiling was non-negotiable and urged Republicans to lift the borrowing cap unconditionally.
Treasury officials said the government had about $300 billion in cash as of April 30. Whether Mr. Yellen will be able to delay his default will depend in part on the following factors: how much tax revenue He will enter federal government this spring.
Payments for the 2022 tax year have yet to arrive. Goldman Sachs economists predicted last week that there could be about $60 billion in cash left in the Treasury by the second week of June, allowing the government to keep paying him through late July. was doing.
Some budget analysts have suggested that winter storms could complicate the Treasury Department’s ability to delay defaults. Severe storms, flooding, and landslides in California, Alabama, and Georgia this year caused the Internal Revenue Service to push back his April 18 filing deadline to October in dozens of counties.
The IRS also gave affected communities time to make contributions to retirement and health savings accounts, which could have an impact on taxable income.
Yellen has already taken steps to ensure that the federal government has enough cash on hand.
Earlier this year, she announced that she would be redeeming some of her existing investments and suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Services Retirees Health Benefit Fund.
Yellen said Monday that the Treasury Department is suspending the issuance of state and local government series Treasury bills to manage risks related to debt limits. She lamented that the move would deprive state and local governments of an important tool for managing their finances.
The brinkmanship of the debt ceiling has reignited debate about how far the executive branch can avoid defaulting. But Yellen dismissed the idea that certain payments or payments could be prioritized. mint platinum coins It’s worth $1 trillion to keep the US solvent.
Markets are largely sober about the outlook for defaults, but Signs that investors are nervous.
They sold Treasury bonds maturing in three months and bought up bonds with just a month to pay off, around the time policymakers said the U.S. cash could be short.
The cost of insuring existing bond holdings against a possible US default has also risen sharply. Still, some analysts say the market reaction needs to be more pronounced to force a quick trade.
In a separate report issued by the Treasury on Monday on the risks facing the economy, Acting Undersecretary for Economic Policy Eric van Nostrand laid out the dire consequences of failing to raise the debt ceiling. made it
“A failure of the US government to meet its obligations (including a failure to meet US obligations) would be an economic catastrophe and would trigger an unknown but significant global recession,” Van Nostrand said. .
Katie Edmondson and Luke Broadwater contributed to the report.
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