(Washington) The United States could find itself in default on its public debt “as of the 1er June” if no agreement is reached between Republicans and Democrats to raise their debt ceiling, currently set at $31 trillion, Treasury Secretary Janet Yellen warned Monday.
In a letter to Republican Speaker of the House of Representatives Kevin McCarthty, Mr.me 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 early as 1er June “.
Concretely, this does not mean that the United States will have to default on their next bond maturities after the 1er June, 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 in particular concern health or retirement benefits.
In a statement, the Congressional Budget Office (CBO) confirmed the Treasury’s estimates, saying that “to the extent that the income reporting campaign has been weaker than initially anticipated, we now estimate that there is a significantly higher risk that the Treasury will no longer have the necessary funds from the beginning of June”.
The United States has reached its debt ceiling, which must be regularly raised by a vote of Congress, from mid-January, to take a first series of measures allowing it to continue to ensure all government spending.
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 project 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 must reach an agreement quickly, however: the current parliamentary session provides for only 12 days of debate on Capitol Hill until 1er next June.
A default “would cause an economic and financial disaster”, warned on April 25 Mme Yelen.