2023-05-01 21:29:36
THE UNITED STATES have come a little closer to a potential default on their public debt following collecting less taxes than expected, thus advancing towards the moment when the country will no longer be able to meet all its obligations, warned Monday, May 1 US Treasury Secretary Janet Yellen.
In a letter addressed to the Republican President of the House of Representatives, Kevin McCarthy, and made public by the Treasury, Janet Yellen indeed estimated that the debt wall might be reached “as of June 1”. “Our best estimate is that we will no longer be able to meet all government obligations by early June, and potentially as early as June 1,” she wrote to the Republican leader.
This does not mean a default as of next month, but the United States, which until now had been able to avoid closing services by playing on the various accounting lines, would find itself this time in a much more precarious economic situation.
In concrete terms, the Treasury would be forced to choose between its various constrained expenditures, which might force it to severely limit some, in particular those relating to health or retirement benefits, in order to be able to continue to fulfill its obligations relating to its future maturities related to its debt.
“It is impossible to predict with certainty the exact date when the Treasury will no longer be able to pay government bills and I will continue to update Congress in the coming weeks as information becomes available,” added Janet Yellen.
In a statement, the Congressional Budget Service (CBO) confirmed the Treasury’s estimates, saying that “to the extent that the income reporting campaign has been weaker than initially anticipated, we now estimate that there has a significantly higher risk that the Treasury will no longer have the necessary funds from the beginning of June”.
The US Congress must regularly vote in order to raise the debt ceiling of the federal state, a procedure carried out 78 times since the beginning of the 1960s, most often without any particular debate.
Race once morest time
But this year, the Republicans, who have had a slight majority in the House since the beginning of 2022, refuse to grant what they consider to be a blank check in favor of the administration of President Biden and want instead that an increase in this ceiling is coupled with a drastic cut in federal spending.
However, the federal government reached its ceiling of 31,000 billion dollars in mid-January, forcing the Treasury to take a first series of measures, above all accounting, in order to remain at the level reached.
On the side of the White House, Joe Biden repeated on several occasions that the raising of the ceiling should be carried out unconditionally, considering that the debt was the result of the policies carried out in the past by all the administrations, from both parties. In a press release, the presidency announced that Joe Biden called Kevin McCarthy on Monday to invite him to a meeting on Tuesday, May 9, in the presence of the main Democratic and Republican officials in Congress.
Last Wednesday, the House of Representatives passed a text proposed by Kevin McCarthy providing for a $4.5 trillion cut in federal spending over the next ten years in exchange for an increase in the ceiling of 1,500 billion, or a review clause on March 31, 2024, which would therefore make the debt one of the main themes of the presidential campaign for the elections November of the same year.
After the publication of Janet Yellen’s letter, the Republicans’ Twitter account in the House also recalled that “the ‘Limit, save, grow’ law will limit Washington’s reckless spending.” The text is unlikely to be voted on by the Senate, controlled by the Democrats by a slight majority.
“It’s time to put partisan interests aside and do what’s right and necessary for the American people and avoid the first government default that would crash markets, raise costs for families and challenge their lives. savings for retirement,” Democratic congressional leaders Chuck Schumer (Senate) and Hakeem Jeffries (House) said Monday in a joint statement.
The two parties must, however, reach an agreement quickly: the current parliamentary session provides for only 12 days of debate on Capitol Hill between now and June 1. A default “would cause an economic and financial catastrophe”, warned Janet Yellen on April 25.
With AFP
1682980339
#default #June #absence #compromise
