Reuters, May 15: Washington The U.S. Treasury Department said on Monday that it anticipates the U.S. government will only be able to pay its payments through June 1 without a rise in the debt ceiling, putting more pressure on congressional Republicans and the White House to come to an agreement soon.
Treasury Secretary Janet Yellen stated in her second letter to Congress in two weeks that it is doubtful that the organisation would be able to make all U.S. government payment obligations by early June, leading to the first-ever U.S. default. By June 1, she warned, the debt cap might become legally obligatory.
The new deadline takes into account further information on receipts of taxes and payments after Yellen informed Congress on May 1 that Treasury would probably run out of money to pay for government obligations in early June. It comes ahead of the President’s Wednesday-starting abroad trip as well as the meeting between House Speaker Kevin McCarthy and U.S. Vice President Joe Biden, who are both slated to hold discussions.
According to Yellen’s letter from today, which differs from one she wrote on May 1 that merely foresaw “a few weeks later,” the actual day Treasury exhausts extraordinary measures may be a few days or weeks later than these predictions. Next week, if new material becomes available, she promised to give Congress another update.
The journey by Biden, which will take approximately a week, begins on Wednesday with a summit of the Group of Seven leaders in Japan. McCarthy claimed on Monday that lengthy discussions at the staff level had not resulted in any progress.
A “constitutional crisis” and a “economic and financial catastrophe” for the American and world economies, according to Yellen, might result from Congress’s failure to increase the $31.4 trillion federal debt ceiling.
With payment operations uncertain throughout May, the nonpartisan Congressional Budget Office last week warned that the United States faced a “significant risk” of missing payments within the first two weeks of June in the absence of an increase in the debt ceiling. According to some analysts, such as the Congressional Budget Office, Treasury might avoid a default for as late as August provided it has access to quarterly tax payments due on June 15 and new borrowing options that become available on June 30.
In her letter on Monday, Yellen encouraged swift action. “We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” said Yellen. She said that the borrowing rates for the Treasury had already significantly increased for assets coming due in early June
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She stated that failing to extend the debt ceiling would be extremely difficult for American families, damage our nation’s standing as a global leader, and cast doubt on our capacity to protect our national security interests.