The United States is heading towards a critical deadline that could result in the country‘s first–ever default. Treasury Secretary Janet Yellen is now warning Congress that the deadline to extend the debt ceiling or face default could be as early as June 1, giving lawmakers just 31 calendar days to avert a self–inflicted economic crisis.
“After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” Yellen wrote in a letter to Congress.
However, Yellen cautioned that the deadline could slide to “a number of weeks later“ and that the estimate is based on currently available data as federal receipts and outlays are inherently variable.
The U.S. hit the statutory borrowing limit in January and has been using “extraordinary measures“ to pay the bills. Now, the Republican–controlled House and the Democratic–led Senate and President Joe Biden are at odds about the way forward, causing further delays in negotiations.
The House GOP–led bill calls for slashing discretionary spending to fiscal 2022 levels and imposing a 1% growth cap for the next decade. Many Republicans say they don‘t want to reduce military spending, which means their proposed cuts would target the 15% of the budget that includes funding for education, job training, air travel and rail safety, law enforcement and veterans‘ benefits.
Democrats argue that if it is implemented, the GOP bill would force cuts to the Veterans Affairs Department. Republican leaders say the legislation wouldn‘t necessitate that, although they haven‘t detailed what programs they would cut or eliminate.
“It is impossible to predict with certainty the exact date when Treasury will be unable to pay the government’s bills,” Yellen wrote. “Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer–term certainty that the government will continue to make its payments.”
If Congress fails to reach an agreement, the U.S. could face its first–ever default, causing economic and financial repercussions that could dwarf the Great Recession. It is now up to lawmakers to come together and reach an agreement that can protect the country from economic catastrophe.
