US President Joe Biden summoned the four top congressional leaders to the White House on Monday next week after the Treasury warned the government could run out of cash to pay bills by June.
US Treasury Secretary Janet Yellen said in a letter to Congress that the agency was unlikely to meet all US government payment obligations “potentially as early as June 1” without congressional action.
The estimate raised the risk that the United States was headed for an unprecedented default that would rattle the global economy, adding new urgency to political calculations in Washington, where Democrats and Republicans were bracing for a months-long standoff. .
Biden called Republican House Speaker Kevin McCarthy in Jerusalem, where he is on a diplomatic trip, to invite him to a White House meeting on May 9. The two leaders have not sat down to discuss the matter since February.
Biden also invited House Democratic Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Republican Leader Mitch McConnell. McConnell, whose fall in March sidelined him for weeks, said he and Biden had a “good talk” today, adding, “I’m sure we’ll talk again.”
House Republicans last week passed a bill to raise the debt ceiling, which includes deep cuts in health care spending for the poor and air traffic controllers, something the Democratic-controlled Senate and Biden say they won’t approve.
Biden has firmly said he will not negotiate raising the debt ceiling, but will discuss budget cuts after a new limit is passed. Congress has often tied increases in the debt ceiling to other budget and spending measures.
A White House official said Biden, who previously said he would not meet with McCarthy at all to discuss the debt ceiling, would “stress that Congress must take action to avoid an unconditional default” on 9 may.
The new potential “X date”, which takes into account April tax payments, is largely unchanged from an earlier estimate, released in January, that the government could run out of cash around June 5. But Yellen added leeway, noting federal revenue and spending are “inherently variable.” The actual date by which the Treasury exhausts the extraordinary measures “could be several weeks later than these estimates,” she wrote.
“It is impossible to predict with certainty the exact date when the Treasury will not be able to pay the government bills,” she wrote.
After hitting the $31.4 trillion borrowing cap on Jan. 19, Yellen previously told Congress that the Treasury would hold off on debt payments, federal benefits and make other spending using extraordinary measures to cash management. One such Treasury action is suspending sales of securities that state and local governments use to temporarily hold cash.
In 2011, a similar fight against the debt ceiling brought the country to the brink of default and led to a downgrade in the country’s prime credit rating. This time negotiations could be even tougher, say veterans of the 2011 showdown.
EXPENDITURE REDUCTION REQUIREMENTS
The April 26 bill passed by the Republican-led House would cut tax incentives for solar energy and implement $4.5 trillion in spending cuts — or about 22% — in exchange for an increase $1.5 trillion from the US debt ceiling.
The bill has no chance of passing the Democratic-controlled Senate, and the White House has said Biden would veto the legislation if it does.
Budget analyst Shai Akabas of the Bipartisan Policy Center said the short delay underscores the urgency of finding a solution to the bitter impasse and dashed hopes that Congress can negotiate through the final months of the summer. .
A potential default within weeks “is not a befitting position for a country considered the bedrock of the financial system, and only adds uncertainty to an already shaky economy”, he added. .
Yellen’s vagueness on the actual default date is due to some tax events in June which could provide some breathing room.
If the Treasury manages to exceed benefit payments by early June, it could take significant cash out of estimated quarterly tax payments due on June 15, analysts said. Then the Treasury could float until June 30, when it would be able to borrow $143 billion by suspending reinvestment of maturing securities held by government pension funds.
With the tax receipts, this loan would allow him to pay his bills until July.
Still, battles over the debt ceiling in the United States are expected to persist for years, with benefit programs like Social Security and Medicare representing the largest budget category and expected to grow dramatically as the population is aging.
As the current debate heats up, Biden, who is seeking re-election in 2024, is using the House Republican proposal to brand his opposition an economic threat to local economies.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)