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Janet Yellen, the US Treasury Secretary, has cautioned that if Congress cannot increase or suspend the debt ceiling, the US may run out of funds by 1 June. The government cannot borrow more money when the debt ceiling is reached. Yellen urged Congress to act immediately to address the $31.4 trillion limit.
President Biden has scheduled a meeting with congressional leaders on the matter on 9 May. The debt ceiling has been adjusted 78 times since 1960. A default could cause turmoil in global financial markets and undermine trust in the US. In a letter addressed to Congress, Yellen stated that suspending or increasing the debt limit at the last moment could be detrimental to business and consumer confidence, increase short-term borrowing costs for taxpayers, and negatively impact the US’s credit rating.
She also remarked that it is impossible to determine exactly when the US will run out of funds. Her announcement coincided with the Congressional Budget Office (CBO) statement that there is a significant risk the Treasury will exhaust its funds in early June.
The CBO report noted the exhaustion date remains uncertain since it is difficult to predict the timing, revenue collections, and outlays in the coming weeks. The Treasury intends to increase borrowing through the end of the quarter, amounting to approximately $726 billion, which is $449 billion more than the initial projection this year. I partly attributed this to lower-than-anticipated income tax receipts, increased government spending, and a beginning cash balance for the quarter that was lower than anticipated.
Democratic Senate Majority Leader Chuck Schumer and House Democratic Leader Hakeem Jeffries stated in a joint statement that the US cannot wait until 1 June to pass a clean bill to avoid a default, as this would have catastrophic consequences for the economy and millions of American families. On the Republican side, House Speaker Kevin McCarthy accused President Biden of failing to do his job and putting the nation in danger of its first-ever default.
In January, Yellen sent a letter to Congress stating that the Treasury Department had begun “extraordinary measures” to avoid a government default.
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Source: Omanghana.com
