The United States has come a little closer to a potential default on its public debt after collecting less taxes than expected, thus advancing towards the moment when the country will no longer be able to meet all its obligations, has warned US Treasury Secretary Janet Yellen on Monday.
In a letter addressed to the Republican Speaker of the House of Representatives, Kevin McCarthy, and made public by the Treasury, Mr.me Yellen has indeed estimated that the debt wall could be reached “from the 1er June “.
“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,” she wrote to the Republican leader.
This does not mean a default as of next month, but the United States, which until now had been able to avoid closing services by playing on the various accounting lines, would find itself this time in a much more precarious economic situation.
In concrete terms, the Treasury would be forced to choose between its various constrained expenditures, which could force it to severely limit some, in particular those relating to health or retirement benefits, in order to be able to continue to fulfill its obligations relating to its future maturities related to its debt.
“It is impossible to predict with certainty the exact date when the Treasury will no longer be able to pay government bills and I will continue to update Congress in the coming weeks as information becomes available,” added M.me Yelen.
In a statement, the Congressional Budget Service (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 has a significantly higher risk that the Treasury will no longer have the necessary funds from the beginning of June”.
The American Congress must regularly vote in order to raise the federal debt ceiling, a procedure carried out 78 times since the beginning of the 1960s, most often without any particular debate.
Race against time
But this year, the Republicans, who have had a slight majority in the House since the start of 2022, refuse to grant what they consider to be a blank check in favor of the Biden administration and instead want an increase of this cap is coupled with a drastic cut in federal spending.
However, the federal government reached its ceiling of 31,000 billion dollars in mid-January, forcing the Treasury to take a first series of measures, above all accounting, in order to remain at the level reached.
On the side of the White House, Joe Biden has repeated several times that the raising of the ceiling must be carried out unconditionally, believing that the debt was the result of the policies carried out in the past by all the administrations, from both parties.
In a statement, the presidency announced that Mr. Biden called Kevin McCarthy on Monday to invite him to a meeting on Tuesday, May 9, in the presence of the main Democratic and Republican congressional officials.
Last Wednesday, the House of Representatives voted on a text proposed by Mr. McCarthy providing for a reduction of 4.5 trillion dollars in federal spending over the next ten years in exchange for an increase in the ceiling of 1.5 trillion, or a review clause at the March 31, 2024, which would therefore make the debt one of the main themes of the presidential campaign for the November elections of the same year.
“After three months of inaction by the Biden administration, the House has acted, and legislation that would end the risk of default awaits consideration by the Senate as we speak,” said Kevin McCarthy said in a statement Monday. “The Senate and the President need to get to work, and fast.”
But the text is unlikely to be voted on by the Senate, controlled by the Democrats by a slight majority.
“It’s time to put aside partisan interests and do what’s right and necessary for the American people and avoid the first government default that would crash markets, raise costs for families and challenge their lives. savings for retirement,” Democratic congressional leaders Chuck Schumer (Senate) and Hakeem Jeffries (House) said Monday in a joint statement.
The two parties must, however, reach an agreement quickly: the current parliamentary session provides for only 12 days of debate on Capitol Hill by 1er next June.
A default “would cause an economic and financial disaster”, warned on April 25 Mme Yelen.