US Treasury Secretary Janet Yellen warned on Monday that the country could default on its national debt on June 1 and urged Congress to pass a debt ceiling suspension as soon as possible.
In a letter to Republican House Speaker Kevin McCarthy, the secretary estimated that the executive branch would stop honoring its government obligations “in early June, possibly June 1, if Congress does not lift or suspend the limit before then.”
Yellen stressed that, given these expectations, it is “essential” that Congress act as quickly as possible to ensure long-term certainty that the government will be able to continue to rely on funds to meet payments.
A Treasury representative sent a similar letter, among others, to the House Democratic leader, Hakeem Jeffries; Senate leader Chuck Schumer, also a Democrat, and conservative Mitch McConnell, the main figure of the Republican opposition in that chamber.
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The current debt ceiling is $31.4 trillion and was reached on January 19th. On the same day, the Treasury Department activated “extraordinary measures” to pay the bills, but it was confirmed at the time that the use of these special financial tools only extended to June 5.
The Republican-majority House of Representatives approved a bill on April 26 to raise the debt ceiling in exchange for deep cuts in public spending, but the initiative has little prospect of success because Democrats hold a majority in the Senate and the White House has warned that the president, Joe Biden, will veto it. against her if he reached his office.
Yellen warned that similar situations in the past have shown that “waiting until the last minute to suspend or increase the debt ceiling can cause severe damage to business and consumer confidence, increase short-term borrowing costs for taxpayers and negatively affect the credit rating of taxpayers in the United States.” ”
The United States has never had to declare default on its national debt, but from time to time considers this possibility because, unlike other countries, its government can issue debt only to the extent set by Congress, which has the power to raise that ceiling as it sees fit.