Friday, June 21, 2024
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US debt ceiling deadline pushed back as talks continue

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US Treasury Secretary Janet Yellen has said the government could run out of money to pay all its bills on June 5, leaving lawmakers a few more days of flexibility to deal with averting an unprecedented debt default.

Yellen’s new estimate, released Friday afternoon, came as the White House and House Republicans hurried to finalize a deal on government spending that would raise the US borrowing limit and lift a huge cloud of uncertainty hanging over the country’s economy. paves the way for its removal.

Yellen previously warned that a default could occur as early as June 1. The latest update means there’s extra breathing room to work out the final details of the agreement.

“Based on the most recent available data, we now estimate that if Congress does not extend or suspend the debt ceiling by June 5, the Treasury will have insufficient resources to meet the government’s obligations,” Yellen said. wrote in a letter to Republican House Kevin McCarthy. speaker.

In the letter, Yellen said the Treasury would be able to make $130 billion in payments related to pensions and government healthcare for seniors in the first two days of June, but that would “leave the Treasury with very few resources”. By the week of June 5, he said, “the Treasury’s estimated resources will be insufficient to meet its obligations”.

Negotiators for President Joe Biden and McCarthy met again on Friday after inching closer to a deal that would extend the borrowing limit for two years until after the 2024 general election, while capping spending growth over the same period. The fitting cap will be installed.

Biden told reporters he was optimistic about the prospect of an agreement. “I expect we’ll know by tonight whether we’ll be able to make a deal,” he said.

But there was still no certainty that a settlement could be reached. “Every time there is more progress, the issues become more difficult and more challenging,” Patrick McHenry, chairman of the House Financial Services Committee and one of the House Republicans’ lead negotiators, told reporters. “At some point this thing may come together – or go the other way.”

He said it could still take “a day or two or three days” to reach a deal.

McCarthy had struck a more upbeat tone as he arrived at the Capitol in the morning.

“I’m going to try as hard as I can to get this done, make more progress today and end the journey. I am a total optimist,” he said. “It really comes down to one thing: It’s about spending. Democrats never want to stop the amount of spending.

Earlier in a CNN interview, Wally Adimoh, the deputy treasury secretary, suggested that a deal was at hand: “What I can say is that we are making progress and our goal is to make sure that we get a deal.” Get the deal because default is unacceptable.”

He said: “The President has said it, and the Speaker has said it. And we have to do something before the beginning of June when the secretary has said that it is highly likely that we will no longer have the resources to pay our bills.

IMF Managing Director Kristalina Georgieva warned on Friday that if no deal was reached, the US would be entering “uncharted territory” and would face a “trimming down” of spending.

Georgieva said that violating the deadline would affect confidence in treasury markets and risk “pulling the anchor” that provides stability to the global financial system.

“We’ve all read fairy tales cinderella – Cinderella was to leave the ball at exactly midnight,” she said. “And we are at this point. So can we fix this before our car turns into a pumpkin?”

Once a deal is struck, any legislation could take several days to be approved by the Republican-controlled House of Representatives and the Democrat-controlled Senate before it can be signed into law by Biden.

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The vote in the closely divided House will be especially intriguing as rank-and-file Republican and Democratic lawmakers have expressed dissatisfaction with the looming deal.

In addition to setting spending limits for the next two years, the potential agreement would also include new work requirements for some Social Safety Net programs, legislation to expedite allowing large investments and a smaller one for the Internal Revenue Service. The rich will be accounted for to promote wealth. taxpayers.

An agreement, if successfully enacted, would eliminate a major source of risk for the US economy and financial markets, which are grappling with banking sector turmoil and the effects of higher interest rates to stoke inflation. .

Talks to resolve the fiscal crisis only moved into higher gear in recent weeks, forcing Biden to cut short a trip to Asia to follow the talks directly in Washington. Even though a deal was getting closer, it was not certain that it could be finalized by the end of Friday, meaning talks could stretch into the Memorial Day long weekend in the US.

US stocks rose, with the S&P 500 closing 1.3 percent higher on news of progress in debt-ceiling talks. Treasury yields rose, mostly in response to stronger-than-expected economic data released in the morning.

Additional reporting by Peter Wells in New York