US Treasury Secretary Janet Yellen said there is a risk that the US will run out of cash by June 1 if Congress does not decide to raise or suspend the debt ceiling.
Reaching the debt ceiling means that the state is deprived of the opportunity to borrow money. Last Monday, May 1, the US Treasury Secretary urged Congress to act as soon as possible to overcome the $31.4 trillion limit. Next week, on May 9, a meeting of the leaders of this legislative body will take place, during which the issue of actions regarding the debt ceiling will be considered.
In the USA, since 1960, the national debt limit has been increased, extended, or revised 78 times. Republicans in the House of Representatives said they would vote for an increase, but only on condition that decisions are made on significant cuts in government spending and the cancellation of some items of the program of US President Joe Biden, including the cancellation of student loans and tax breaks for clean energy. Democrats in the Senate reacted negatively to these statements. Joe Biden, in turn, noted that the issue of reducing spending and canceling some of the items of his program is not subject to discussion.
Experts say that a potential default could trigger a recession and cause an increase in the unemployment rate in the United States. Also, this state of affairs blocks the ability of the state to borrow funds to pay salaries to civil servants and the military, social security checks, and other obligations.
In a letter to members of Congress, Janet Yellen said that the experience of previous deadlocks with the debt bounds indicates that waiting until the last minute before suspending or increasing the limit can cause sensitive damage to business and negatively affect consumer confidence. The minister also noted that it is impossible to predict the moment when cash will run out in the United States, but her warning about the risk of such a state of affairs by the beginning of June is confirmed by the Congressional Budget Office (CBO), which reported that at the beginning of the first summer month, the Treasury may be left without funds.
The Treasury plans to increase borrowing by the end of the quarter ending in June, totaling about $726 billion. This figure is approximately $ 450 billion higher than previously projected volumes. Officials claim that the increase in the amount of borrowing is due to income tax receipts, which turned out to be lower than expected, growth in government spending, and a small balance of money at the beginning of the quarter.
The leader of the Democratic majority in the Senate, Chuck Schumer, and the leader of the Democrats in the House of Representatives, Hakim Jeffries, said that the United States cannot wait until June 1 to pass a bill to avoid default and generated by it disastrous consequences for the economy.
As we have reported earlier, Yellen Warns Banks Could Pull Back on Lending.