The letter from the head of the US Treasury speaks of the urgency of the current situation. The risk of an unprecedented default that threatens to shock the global economy is giving new urgency to the political debate in Washington, where Democrats and Republicans are bracing for months of budget showdown.
Following Yellen’s warning, Joe Biden on Monday invited Republican and Democratic leaders from the Senate and House of Representatives to meet at the White House next week.
A White House official said Biden was initially not going to meet with Speaker of the House of Representatives McCarthy to discuss the national debt limit. But under the circumstances, Biden believes “Congress must take action to avoid default, without any strings attached” by May 9.
On April 26, the Republican-led House of Representatives passed a bill to raise the national debt ceiling, but the bill contains provisions for a steep cut in health insurance for socially disadvantaged groups. , a cut in solar tax credits and a spending cut of $4.5 trillion, or about 22%, in exchange for a $1.5 trillion increase in the US debt ceiling .
The bill has no chance of being approved by the Democratic-controlled Senate. The White House also said Biden would veto the legislation if it passes.
The potential new X-date, which factors in April tax payments, is largely unchanged from the previous estimate released in January, which suggested the US government could face a cash crunch toward the June 5.
However, Yellen added some wiggle room, noting in the letter that federal revenue and spending are “inherently volatile.” The actual date when the Treasury will run out of emergency measures “could be a few weeks later than these estimates,” Yellen wrote.
According to her, “it is impossible to predict with certainty the exact date when the Ministry of Finance will not be able to pay the government bills”.
After the $31.4 trillion borrowing limit was reached on Jan. 19, Yellen told Congress that the Treasury would support debt payments, federal benefits and other spending through relief measures. cash management emergency.
One of these measures by the Ministry of Finance is the suspension of the sale of securities that state and local authorities use for the temporary storage of funds.
In 2011, such a fight over the national debt ceiling brought the United States to the brink of default and led to a drop in the country’s high credit rating. This time, the negotiations are likely to be even more difficult.
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