(Washington) The United States could find itself in default on its public debt “as soon as June 1” if no agreement is reached between Republicans and Democrats to raise the ceiling on its debt, currently set at $31 trillion , Treasury Secretary Janet Yellen warned Monday.
In a letter to Republican Speaker of the House of Representatives Kevin McCarthty, Ms. Yellen said that “our best estimate is that we will no longer be able to meet all of the government’s obligations in early June, and potentially as soon as June 1st “.
Concretely, this does not mean that the United States will have to default on its next bond maturities after June 1, but that, in order to be able to continue to face these constrained expenses, the federal government will have to strongly limit others, which could relate in particular to health or retirement benefits.
In a statement, the Congressional Budget Office (CBO) confirmed Treasury’s estimates, saying that “to the extent that the income reporting campaign has been weaker than initially anticipated, we now estimate there is a significantly higher risk that the Treasury will no longer have the necessary funds by early June.”
Republicans, who have held a slim majority in the House of Representatives since early January, and Democrats have since entered a political tussle, with Republicans linking the debt ceiling increase to a cut in federal government spending for validate an agreement.
On the side of the White House, President Joe Biden has repeated on several occasions that the raising of the ceiling must be carried out unconditionally, considering that the latter was the result of the policies carried out in the past by all the administrations, stemming from the two parties.
On Wednesday, the House of Representatives voted on a plan proposed by Mr. McCarthy providing for a $4.5 trillion cut in federal spending over the next ten years in exchange for a $1.5 trillion ceiling increase, or a review clause at 31 March 2024, which would therefore make debt one of the main themes of the presidential campaign for the November elections of the same year.
The text is unlikely to be voted on by the Senate, controlled by the Democrats by a slight majority.
The two parties need to reach an agreement quickly, however: the current parliamentary session provides for only 12 days of debate on Capitol Hill by June 1.
A default “would cause an economic and financial catastrophe”, Ms. Yellen had warned on April 25.