U.S. in Trouble, Can Reach Debt Cap by June 1? Know the Details
- Posted on May 2, 2023
- By Top Stories
- 66 Views
On Monday, Janet Yellen, the secretary of the Treasury, informed Congress that if
lawmakers do not increase or suspend the country's borrowing authorization before June 1
and avert what might become a worldwide financial crisis, the United States could default on
its debt as early as that date.
Ms. Yellen pleaded with House and Senate leaders in a letter To remove the $31.4 trillion
cap on the nation's allowed borrowing capacity, "to act swiftly to defend the United States'
full faith and credit" practicable." She continued that the exact day the United States will run
out of money cannot be accurately predicted.
In the letter, Yellen said that raising or suspending the debt ceiling at the last minute can
seriously harm consumer and business confidence, increase the cost of short-term
borrowing for taxpayers, and break the United States' credit rating.
On Monday, the Congressional Budget Office said there was a higher chance that the United
States would run out of money in early June. The CBO Director Phillip L. Swagel stated that
the Treasury's exceptional measures "will be exhausted sooner than we previously
projected" due to lower-than-anticipated tax receipts this filing season and a quicker IRS
processing of already received returns.
Ms. Yellen informed congressional leaders in a letter she sent in January that her
department has started taking "extraordinary measures" to prevent a federal budget
Even though the federal government is on the verge of exceeding the debt ceiling, the
Treasury announced Monday that it intends to boost borrowing during the quarter from April
to June of this year.
The United States intends to borrow $726 billion this quarter. Due to a lower
beginning-of-quarter cash position and forecasts of lower-than-expected income tax receipts
and more spending, this is $449 billion more than anticipated in January
Treasury officials claim that the debt ceiling dispute poses the most significant risk to the
U.S. financial position, even as Russia's invasion of Ukraine continues to drag the country's
According to a statement from Eric Van Nostrand, acting assistant secretary for economic
policy, The resulting uncertainty might increase borrowing prices and cause significant
financial stress, weakening our labor market and our standing in the international community
even if Congress finally lifts the debt ceiling before a default happens.
Bipartisan Policy Center's Shai Akabas, director of economic policy, predicts the so-called
X-date when the government exhausts its extraordinary measures, stating, "There is no time
to squander. He claims that his organization will also offer an updated X-date estimate in the
"The U.S. government is once more only a few months or maybe weeks away from failing to
fulfill its responsibilities. That is not a position appropriate for a nation that is regarded as the
foundation of the financial system, and it only increases uncertainty in an already unstable
Democrats and the White House are urging Congress to raise the debt ceiling. President Joe
Biden wants to raise the cap without engaging in negotiations. Most recently, a plan requiring
expenditure reductions in return for raising the debt ceiling was approved by the House
On Monday, Biden invited the four members of Congress to the White House to discuss the
matter. At last week's Cap-to-Cap policy conference in Washington, Ms. Yellen stated:
"Congress must act by passing a resolution to increase or suspend the debt ceiling, and it
should do so immediately and without restrictions.
One of our government's most important duties is to carry this out. The four Congressional
leaders have been invited to the White House on May 9 as part of President Joe Biden's
attempt to defuse the debt limit deadlock. This move comes amid mounting fears of a default
as the federal government may be unable to pay its obligations as early as June 1.
Officials from the administration and Congress confirmed the calls to specific members and
the meeting date while requesting anonymity to discuss the agenda. Although he did not say
whether he would attend the meeting, Sen. Minority Leader Mitch McConnell, R-Kentucky,
said he spoke with Biden and expected to speak with him again.
The urgency of preventing default will be emphasized, and Mr. Biden will talk about how to
start a new process for approving a separate fiscal 2024 budget. He aims to highlight that
Congress must act to avoid default without conditions.
There is no assurance of progress on a matter that has exposed a chasm in Republican and
Democratic views on how the country should be run, even if lawmakers start talking. On the
issue of extending the government's borrowing authority, Mr. Biden and House Speaker
Kevin McCarthy, a Republican from California, cannot agree.
While Mr. McCarthy and GOP lawmakers demand spending cuts in exchange, the ceiling of
$31.4 trillion has been called for by the president. Last week, the GOP passed a bill to save
$4.8 trillion in deficit over ten years.
Mr. McCarthy has urged Mr. Biden to start talking. The president, however, stated in a
speech just a little after noon on Monday that the GOP congressional leader first needed to
pledge that the United States government would not fall into default.
The debt ceiling would be raised by $1.5 trillion or until March 31, 2024, thanks to a plan that
House Republicans enacted last week. This might lead to another battle leading up to that
year's presidential election. The bill would slash discretionary expenditure over the following
ten years in exchange.
If the government of the best economy in the world cannot pay its bills, economists have
issued dire warnings about a financial catastrophe.
A default might cause severe recessions in the United States and other countries,
undermine America's financial credibility, and complicate any eventual economic recovery.
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