The warning comes from US Treasury Secretary Janet Yellen. The United States is one step 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.
"Our estimate is that we will no longer be able to meet all of the government's obligations beginning in June, and potentially as early as June 1," Ms. Yellen wrote to the Republican Speaker of the House of Representatives on Monday, May 1, Kevin McCarthy, in a letter made public by the Treasury. This does not mean a default 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 Janet Yellen.
Joe Biden invites Kevin McCarthy to a meeting
In a statement, the Congressional Budget Service (CBO) confirmed 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 by early June.”
The US Congress must regularly vote to raise the federal government's debt ceiling, a procedure carried out 78 times since the early 1960s, most often without any particular debate.
But this year, the Republicans, who have had a slight majority in the House since the beginning of 2022, refuse to grant what they consider to be a blank check in favor of the Biden administration, and instead want a raising this cap is coupled with a drastic cut in federal spending. However, the federal government reached its ceiling of 31,400 billion dollars (about 28,500 billion euros) 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 said Biden called Kevin McCarthy on Monday to invite him to a meeting on Tuesday, May 9, with top Democratic and Republican congressional officials in attendance.
"The Senate and the President need to get to work, and fast"
On April 26, the House of Representatives passed a text proposed by Mr. McCarthy providing for a $4.5 trillion reduction in federal spending over the next ten years in exchange for a $1.5 trillion ceiling increase, or a clause of review on March 31, 2024, which would therefore make the debt one of the main themes of the presidential campaign for the elections of November of the same year.
"After three months of inaction by the Biden administration, the House has acted, and legislation that would end default risk awaits consideration by the Senate as we speak," said , Monday, in a press release Kevin McCarthy. "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 partisan interests aside 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 reach an agreement quickly, however: the current parliamentary session provides for only twelve days of debate on Capitol Hill by June 1. A default "would cause an economic and financial catastrophe", warned Janet Yellen on April 25.
