Key Takeaways:
- US Treasury Secretary has again warned that the Biden Administration will run out of money by June.
- President Joe Biden held a second round of meetings with Congressional leaders at the White House.
- The US Government could default if Congress fails to raise the debt ceiling soon.
YEREVAN (CoinChapter.com) — In a dire warning to Congress, Treasury Secretary Janet Yellen has once again emphasized that the United States could face a default on its debt as early as June 1.
Underscoring the urgent need for lawmakers to take decisive action in raising or suspending the debt limit before the deadline, she called upon the House Speaker, Kevin McCarthy, and Senate majority leader, Charles Schumer, to agree with President Joe Biden.
“With additional information now available, I am writing to note that we still estimate that Treasury will likely no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,”
she wrote.
Negotiations between the White House and congressional leaders have gained momentum as they grapple with potential spending cuts in exchange for the passage of a debt ceiling hike in the House.
While the Democratic-majority Senate is expected to support the agreement reached with the Republican-controlled House, conflicting reports on the progress of negotiations have surfaced in recent days, raising concerns about finding a resolution in time.
Also Read: US gears up for immigration crisis as President Joe Biden lifts Donald Trump-era Title 42 measure
Negotiations Intensify as Debt Ceiling Deadline Approaches
Earlier this month, President Biden met with the Majority and Minority leaders of both the House and the Senate to find a breakthrough. However, the meeting ended without substantial progress, with both sides accusing each other of being unwilling to budge.
Meanwhile, the Republican House Speaker Kevin McCarthy argued that the ball is in Joe Biden’s court.
Heeding calls from the Treasury Department, he and his colleagues voted to raise the government’s $31.4 trillion debt ceiling by an additional $1.5 trillion. However, they also imposed a 14% cut on the Biden Administration’s spending, which the White House strongly denounced.
President Biden and Democrats expect Congress to raise the US Debt ceiling unconditionally. However, the Republicans are unwilling to grant the Biden Administration free access to more funds.
However, things seem to be moving forward. After the second round of meetings, the sides expressed hope that they could reach an agreement soon. President Biden termed the meeting with congressional leaders “productive” and said he is “confident” they will “continue to make progress toward avoiding default.”
Meanwhile, McCarthy revealed that his staff, along with Louisiana Republican Representative Garret Graves, would negotiate with Office of Management and Budget Director Shalanda Young and White House aide Steve Ricchetti to solve the debt crisis.
For the House Speaker, the fact that they now “have a format, a structure” was a positive sign.
Recommended: China-US relations worsen as Beijing sentences old US citizen to life in prison
Economic Fallout and Financial Consequences at Stake post default
As has been stressed in previous letters to Congress, Treasury Secretary Yellen reiterated the situation’s urgency, warning against waiting until the last minute to address the debt limit issue.
Yellen emphasized that such procrastination would have severe repercussions, causing harm to business and consumer confidence, increasing short-term borrowing costs for taxpayers, and negatively impacting the credit rating of the United States.
The Treasury has already witnessed a substantial increase in borrowing costs for securities maturing in early June, signaling the growing urgency of the situation.
“If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests,”
Janet Yellen wrote.
Meanwhile, due to the ongoing debt ceiling negotiations, President Joe Biden shortened his planned trip to Asia Pacific. Instead, the US President will travel to the Japanese city of Hiroshima to attend the Group of Seven (G7) summit later this week.
The initial 8-day trip would also take him to Papua New Guinea, making him the first sitting US President to visit the country. Biden was also scheduled to visit Australia to attend the Quadrilateral Security Dialogue (QUAD) summit.
However, the White House has confirmed that the President will return to the US from Japan. As a result, the QUAD announced that they had canceled the summit.
