Treasury Secretary Yellen Extends Deadline for Raising Debt Ceiling

Janet Yellen, the Treasury Secretary for the United States, has extended the probable date of default on sovereign debt payments that will occur in the absence of raising the debt ceiling through legislation from Congress. In a letter sent to House Speaker Kevin McCarthy on Friday, Yellen stated that unless a bill is passed to increase the debt limit, the United States will default on its debt on June 5th. The anticipated date has been revised from Yellen’s earlier estimated date of June 1st, expressed through a letter sent by her to McCarthy on May 1st.

Yellen’s office has estimated that Treasury will allocate an approximate amount of $92 billion for payment and transfers during the week of June 5th. Despite this allocation, Yellen highlighted that the Treasury’s projected resources would be insufficient to fulfill all outstanding obligations. As of Thursday, the Treasury’s general account, which serves as the central source of daily U.S. Government expenditures, has only $38.8 billion left to fund the government as confirmed by the Daily Treasury Statement. Secretary Yellen referred to the statement saying that this amount was a very low level of remaining resources.

Although Congress has left Washington, D.C., for the Memorial Day weekend, negotiations between McCarthy and the representatives of President Joe Biden continue to reach a deal before the anticipated default. However, given the intense negotiations, the situation remains highly charged, with the possibility of catastrophic effects on the global economy if an agreement is not reached. The House Freedom Caucus, a group of fiscal conservatives, have displayed concerns regarding the potential outcome of the negotiations, insisting that any increase in the debt ceiling must be linked to significant spending cuts.

The Limit, Save, Grow Act passed by the House in April outlining McCarthy’s debt limit proposal has been rejected by President Biden and the Senate Democrats. The Freedom Caucus reiterates their stance on the act, which contains provisions requiring deep spending cuts while insisting that there should be no further discussions on an offer until Democrats accept the proposed act. Although Biden received support from some Democrats to unilaterally pay US debt obligations through invoking the 14th Amendment to the U.S. Constitution, Deputy Adeyemo announced that Biden would not consider this option. Despite negotiations, Republicans and Democrats remain at loggerheads on the interpretation of the propositions put forward to tackle the issue.

The situation will continue to be challenging, however, McCarthy has affirmed that his team will continue to work on securing a satisfactory solution that is acceptable to all parties concerned. The Freedom Caucus and McCarthy’s office have yet to respond to requests for comment. Elsewhere, Republican representatives continue to demand accurate and honest information from Yellen and her advisors, especially concerning the original projection of a June 1st default date. The meetings remain intense and potentially volatile as negotiations continue.

Source: The Daily Caller

Written by Staff Reports

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