The CBO’s new estimate is largely in line with Treasury Secretary Janet Yellen’s June 1 deadline for a potential default, underscoring the urgent need to resolve the bitter standoff between Republicans and Democrats over raising the limit. legal borrowing.
“There is a significant risk that at some point in the first two weeks of June the government may not be able to pay all of its obligations,” the office warned.
The bureau also noted that federal government debt payments “will remain uncertain throughout May, even if Treasury funds run out in early June.”
US President Joe Biden and Democrats in Congress have demanded swift action to raise the legal borrowing limit by $31.4 trillion unconditionally since the start of the year.
Republicans, who tightly control the House of Representatives, want to impose new limits on future spending before giving the green light to more payments to cover borrowing on spending they approved earlier.
The US government had already reached the statutory borrowing limit in January, and since then the Treasury Department has used special accounting measures to make cash available. Yellen told Congress that those measures could end on June 1.
On Thursday, the International Monetary Fund expressed concern about the “serious repercussions” on the global economy of the US default.
At a meeting of G7 finance officials in Japan, World Bank President David Malpass said the prospect of a US default, for the first time in its history, would add to the problems facing the global economic downturn.
“It’s clear, the crisis facing the world’s largest economy will negatively affect everyone,” Malpass told Reuters on the sidelines of the meeting.
Biden is due to attend a meeting of G7 leaders in Niigata, Japan next week, but said he could cancel his trip if he and congressional leaders don’t make enough progress on raising the debt ceiling.
Negotiations continue between White House officials and aides to Republican and Democratic leaders in Congress, but a meeting scheduled for Friday on the public debt ceiling between President Joe Biden and senior lawmakers has been postponed until next week. .
Sources close to the talks said the delay was a sign that talks at staff level were progressing.
Britain’s Finance Minister Jeremy Hunt said on Saturday that if the United States failed to reach an agreement to raise its debt ceiling and its gross domestic product derailed, it would have “very serious” consequences.
Hunt made the remarks to reporters before meeting US Treasury Secretary Janet Yellen on the sidelines of a meeting of G7 finance ministers in Japan.
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