The United States is facing a financial crisis, as Treasury Secretary Janet Yellen has warned that the government could run out of cash to pay its bills as early as June 1. This news has caused President Joe Biden to call a meeting with the top four congressional leaders in an effort to reach a solution to the problem.
The new estimate has increased the risk of an unprecedented default that could have a significant impact on the global economy. The situation has added new urgency to political calculations in Washington, and negotiations between Democrats and Republicans over the issue of raising the debt limit are expected to be lengthy.
In the past, solutions have included pairing debt-ceiling increases with other budget and spending measures. However, House Republicans have already passed a bill to raise the debt limit that includes cuts to spending, which Democrats have said they will not approve.
{{/usCountry}}In the past, solutions have included pairing debt-ceiling increases with other budget and spending measures. However, House Republicans have already passed a bill to raise the debt limit that includes cuts to spending, which Democrats have said they will not approve.
{{/usCountry}}President Biden has extended invitations to House Democratic leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer, and Republican leader Mitch McConnell to discuss the issue at the White House on May 9. Biden has insisted that he will not negotiate over the debt ceiling increase, but will discuss budget cuts after a new limit is passed.
The new potential "X-date," which considers April tax payments, is similar to a previous estimate issued in January that predicted the government could run out of cash by June 5. However, Yellen's letter added that federal receipts and outlays are "inherently variable" and the actual date Treasury exhausts extraordinary measures "could be a number of weeks later than these estimates."
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Experts are calling for a solution to be reached urgently to avoid damaging the US economy. In 2011, a similar debt-ceiling fight almost led to a default and prompted a downgrade of the country's top-notch credit rating. With negotiations expected to be even more difficult this time, the stakes are high and the world is watching.
(With inputs from Reuters)