debt ceiling | Yellen says US could be in default “on June 1st”

(WASHINGTON) The United States has come a little closer to defaulting on its public debt after collecting lower taxes than expected, thus moving toward the moment when the country will no longer be able to honor all of its bonds, US Treasury Secretary Janet Yellen warned Monday.

In a letter addressed to Republican House Speaker Kevin McCarthy and published by the Treasury Department.I Yellin has already estimated that the debt wall “can be reached from 1any June “.

“Our best estimate is that we will no longer be able to meet all of the government’s obligations by the beginning of June, possibly as early as June 1.”any June,” she wrote to the Republican leader.

This does not mean a default next month, but the United States, which until now was able to avoid closing services by playing on various accounting lines, will find itself this time in a more dangerous economic situation.

Concretely, the Treasury will be forced to choose between its various restricted expenditures, which may force it to severely restrict some of them, particularly those related to health or retirement benefits, so that it can continue to meet its obligations regarding them. future maturities related to its debts.

M added.I relents.

In a statement, the Congressional Budget Service (CBO) confirmed the Treasury’s estimates, saying that “to the extent that the income reporting campaign was weaker than initially anticipated, we now assess that there is a much greater risk that the Treasury will no longer get the funds.” Necessary from the beginning of June.

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The US Congress must vote regularly to raise the federal debt ceiling, a measure that has been implemented 78 times since the early 1960s, often without any particular debate.

A race against time

But this year, Republicans, who have held a slight majority in the House of Representatives since the start of 2022, have refused to grant what they see as a blank check in favor of the Biden administration and instead want to increase that limit along with sharp cuts in federal spending.

However, the federal government reached its ceiling of $31,000 billion in the middle of last January, forcing the treasury to take a first series of measures, above all accounting, in order to stay at the level it reached.

On the part of the White House, Joe Biden has repeated many times that raising the ceiling must be done unconditionally, believing that the debt was the result of policies implemented in the past by all administrations, on both sides. .

And the presidency announced in a statement that Biden called Kevin McCarthy on Monday to invite him to a meeting on Tuesday, May 9, in the presence of senior Democratic and Republican congressional officials.

Last Wednesday, the House of Representatives voted on a text proposed by McCarthy providing for $4.5 trillion cuts in federal spending over the next 10 years in exchange for a $1.5 trillion ceiling increase, or provision for a March 31, 2024 review, making debt one of the main themes of the campaign. presidential elections in November of the same year.

“After three months of inaction by the Biden administration, the House has acted, and legislation that would end the risk of default is awaiting consideration by the Senate as we speak,” Kevin McCarthy said in a statement Monday. “The Senate and the President need to act, and fast.”

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But the text is unlikely to be voted on by the Senate, which Democrats control by a slight majority.

“It is time to set aside partisan interests and do what is right and necessary for the American people and avoid the first government default that would collapse markets, raise costs for families and challenge their lives savings for retirement,” Chuck Schumer (Senatorial) said Hakeem Jeffries (House) Monday in a joint statement.

However, the two sides must reach an agreement quickly: The current congressional session mandates only 12 days of debate on Capitol Hill by the 1any next June.

He warned on April 25 that default would “cause an economic and financial catastrophe”.I relents.

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