WASHINGTON, May 1 (Reuters) – US President Joe Biden on Monday summoned four top congressional leaders to the White House next week after the Treasury warned that the government may not have enough money to pay its bills in June.
Treasury Secretary Janet Yellen said in a letter to Congress that the agency would not be able to meet all of its payment obligations to the US government “potentially by June 1” without action by Congress.
The estimate raises the risk that the United States is headed for an unprecedented default that would shake the global economy, adding new urgency to political calculations in Washington, where Democrats and Republicans are aligned. in a month-long standoff.
Biden called Republican House Speaker Kevin McCarthy in Jerusalem, where he is on a diplomatic trip, to invite him to a meeting at the White House on May 9. The two leaders have not sat down to discuss the issue since February.
Biden also extended invitations to House Democratic leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Republican leader Mitch McConnell. McConnell, whose fall in March sidelined him for weeks, said he and Biden had a “good conversation” today, adding: “I’m sure we’ll talk again.”
House Republicans passed a bill to raise the debt limit last week that includes drastic spending cuts from health care for the poor to air traffic controllers, the Senate said. which is controlled by the Democrats and Biden they do not approve.
Biden has consistently said he will not negotiate on raising the debt ceiling, but will discuss budget cuts after a new limit is passed. Congress often pairs raising the debt ceiling with other budget and spending measures.
A White House official said Biden, who previously said he would not meet with McCarthy to discuss the debt limit, “stressed that Congress must act to avoid default without conditions” on May 9.
The new potential “X-date,” which takes into account tax payments in April, is largely unchanged from a previous estimate, issued in January, that the government could run out of cash around June 5. But Yellen added some wiggle room, noting federal receipts and expenditures are “naturally variable.” The actual date that the Treasury exhausts the extraordinary measures “may be several weeks later than these estimates,” he wrote.
“It is impossible to predict with certainty the exact date when the Treasury will be unable to pay government bills,” he wrote.
After hitting the $31.4 trillion borrowing cap on January 19, Yellen previously told Congress that the Treasury would continue to pay the debt, federal benefits and make other spending by using extraordinary money management measures. . One such measure taken by the Treasury is the suspension of the sale of securities used by state and local governments to temporarily hold money.
In 2011, a similar fight over the debt ceiling brought the country to the brink of default and prompted a downgrade of the country’s top-notch credit rating. This time, negotiations will be more difficult, said veterans of the 2011 confrontation.
COST CUT DEMANS
The April 26 bill passed by the Republican-led House would slash tax incentives for solar energy and implement $4.5 trillion in spending cuts — or about 22% — in exchange for a $1.5 trillion increase in the cap. US debt.
The bill has no chance of passing the Democratic-controlled Senate and the White House has said Biden would veto the legislation if it did.
Budget analyst Shai Akabas of the Bipartisan Policy Center said the short deadline underscored the urgency of finding a solution to the bitter standoff, and that it dashed hopes that Congress could reach a deal in the late summer months. hot
A potential default within weeks “is not a position that suits a country that is considered the cornerstone of the financial system, and only adds to the uncertainty of a shaky economy,” he added.
BREATHING ROOM
Yellen’s lack of clarity on the actual default date is due to some fiscal events in June that may buy a little breathing room.
If the Treasury can make this early June benefit payment, it could take more money out of the estimated quarterly tax payments due June 15, analysts said. Then the Treasury can float until June 30, when it can tap $143 billion in borrowing by suspending reinvestment in maturing securities held by government retirement funds.
Along with tax receipts, the borrowing will allow it to pay bills through July.
However, battles over the US debt ceiling are likely to continue in the coming years, with benefit programs such as Social Security and Medicare accounting for the largest budget category and expected to grow further. -well as the population ages.
As the current debate heats up, Biden, who is seeking re-election in 2024, is using the House Republican proposal to tag his opposition as an economic threat to local economies.
Reporting by David Lawder
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