Last update: 02 May 2023, 04:00 HST
Treasury Secretary Janet Yellen told Congress Monday that the United States could default on its debt as early as June 1, if lawmakers don’t increase or suspend the country’s statutory borrowing power before then. date.
In a letter to House and Senate leaders, Yellen urged congressional leaders “to protect the full faith and credit of the United States by acting as soon as possible” to address the $31.4 trillion limit of its legal borrowing power. She added that it is impossible to predict with certainty the exact date when the United States will run out of cash.
“We have learned from past debt limit stalemates that waiting until the last minute to suspend or increase the debt limit can seriously damage business and consumer confidence, increase short-term borrowing costs for taxpayers and negatively impact the credit rating of the United States. United States,” Yellen said in the letter.
Also on Monday, the Congressional Budget Office signaled that it saw an increased risk that the United States would run out of funds in early June. CBO Director Phillip L. Swagel said that due to lower-than-expected tax receipts this season and a faster IRS processing returns already received, “Extraordinary Treasury Measures will be exhausted sooner than expected.” foreseen”.
In January, Yellen sent a letter to congressional leaders, saying his department had begun using “extraordinary measures” to avoid federal default.
The Treasury said Monday it plans to increase borrowing in the April-June quarter of this year, even as the federal government is set to exceed the debt ceiling.
The United States plans to borrow $726 billion in the quarter. That’s $449 billion higher than expected in January, due to a lower cash balance at the start of the quarter and weaker-than-expected tax revenue and higher spending projections.
While Russia’s invasion of Ukraine remains a burden on US economic growth, Treasury officials say the debt ceiling debate poses the greatest risk to the US fiscal situation.
Eric Van Nostrand, acting assistant secretary for economic policy, said in a statement that “even if Congress ultimately raises the debt ceiling before a default occurs, the resulting uncertainty could increase costs. borrowing and induce other financial strains that would weaken our labor market and our standing in the world.”
“There is no time to waste,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center, which predicts the so-called X date when the government exhausts its extraordinary measures. His organization will also provide an updated X-date projection in the coming days, he says.
“The US government is again within months, even weeks, failing to meet all of its obligations. This is not a befitting position for a country seen as the bedrock of the financial system, and it only adds uncertainty to an already shaky economy.
Democrats and the White House are pushing Congress to raise the federal debt ceiling. President Joe Biden wants the cap raised without negotiation. The Republican majority in the House recently passed a bill to guarantee spending cuts in exchange for raising the debt ceiling.
Yellen said last week at the Cap-to-Cap policy conference in Washington that “Congress must vote to raise or suspend the debt ceiling, and it must do so without conditions and it must not wait for the last minute. I believe it is a fundamental responsibility of the leaders of our nation to ensure that this is done.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)