Janet Yellen, the secretary of the United States Treasury, has warned that the United States may run out of cash by June 1 if Congress fails to raise or suspend the debt ceiling. Reaching the debt ceiling would prevent the government from borrowing additional funds.
Ms. Yellen urged Congress to address the $31.4tr (£25.12tr) limit "as soon as possible" on Monday. On 9 May, President Joe Biden convened a meeting of congressional leaders to discuss the issue. The debt limit has been raised, increased, or revised 78 times since 1960.
In this instance, House Republicans have demanded drastic expenditure cuts and a rollback of certain elements of President Biden's agenda, including his student loan forgiveness programme and green energy tax credits, in exchange for votes to increase the debt ceiling. This has provoked objections from Senate Democrats and from President Biden, who stated last week that the issue is "not negotiable." However, the president is facing increasing pressure from business groups, such as the US Chamber of Congress, to discuss Republican proposals.
A default, which would be the first in US history, could destabilize global financial markets and erode global confidence in the United States as a business partner. Experts have warned that a default could cause the United States to enter a recession and increase unemployment.
It would also prevent the United States from borrowing money to pay government employees and military personnel, social security checks, and other obligations, such as payments to defense contractors. Even weather forecasts could ultimately be affected, as many rely on data from the National Weather Service, which is funded by the federal government.
In a letter to members of Congress dated Tuesday, Ms. Yellen stated that they have learned that waiting until the very last minute to suspend or raise the debt limit may harm business and consumer confidence. It increases temporary borrowing expenses for taxpayers, and adversely affects the United States' credit rating. She added that it is impossible to predict precisely when the United States will run out of money.
Her statement was made on the same day that the Congressional Budget Office (CBO) reported a significantly increased risk that the Treasury will run out of money in early June.
The Treasury intends to increase borrowing through the end of the June quarter, to a total of approximately $726bn - approximately $449bn more than anticipated earlier this year. Officials cite lower-than-anticipated income tax receipts, higher government expenditure, and a lower-than-anticipated beginning-of-quarter cash balance as contributing factors.
Monday, Democratic Senate Majority Leader Chuck Schumer and Democratic House Leader Hakeem Jeffries issued a joint statement stating that the United States cannot afford to wait until the 1st to come together, pass a clean bill to avoid a default and avert disastrous repercussions for our economy and millions of American families.
On the Republican side, House Speaker Kevin McCarthy charged that President Biden “refused to do his job” and “threatened to bumble our nation into its first-ever default.”
McCarthy stated in a statement that the clock is ticking and After three months of inaction by the Biden administration, the House took action, and a measure that would eliminate the risk of default is currently pending in the Senate.
