The government declared a new default date of June 5 late Friday, halting debt ceiling talks as time was running out.
This forced the White House and Republicans into another week of precarious negotiations over spending reductions and lifting the country’s legal debt limit.
New Debt Ceiling Deadline Looms
The additional deadline was announced in a letter from Janet Yellen, the Treasury Secretary, at a time when the world and Americans were already very anxious about US brinkmanship.
In a direct warning, Yellen stated that failing to take action by the new deadline would put the American people through great suffering, damage our position as a global leader, and cast doubt on our capacity to protect our national security interests.
Due to the next Social Security payment being due the following week, anxious retirees were already preparing backup plans in case checks were missed.
A week from Monday is the revised deadline, which is four days later than originally anticipated. Yellen stated that Treasury would have used all exceptional measures.
Meetings between President Joseph Biden and House Speaker Kevin McCarthy were likely to be disrupted by the surprise revelation.
On a two-year budget-cutting agreement that would also raise the debt ceiling past the following presidential election, they were getting closer.
A deal had seemed to be approaching on Friday after frustrating rounds of discussions behind closed doors.
Republicans’ campaign for drastic expenditure cutbacks, which Democrats oppose, has made some progress. McCarthy’s proposals for stricter job requirements on government food stamp recipients, which Democrats claim is impossible, have the two sides particularly dug in.
Early on Friday, McCarthy claimed that the White House and his Republican debt negotiators were struggling to reach a deal with Biden before Parliament adjourned for the lengthy Memorial Day holiday weekend.
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Economy Hangs in the Balance
To be approved by the divided Congress, any agreement would need to be a political compromise that had the backing of both Democrats and Republicans.
Failing to increase the country’s current $31 trillion borrowing cap would have a devastating impact on both the American and global economies.
McCarthy is under pressure from many of the hard-right Trump-aligned Republicans in Congress, who have long questioned the Treasury’s estimates.
The White House has maintained that cutting tax advantages for wealthy individuals and some corporations can lower deficits, but McCarthy claimed that he advised the president that raising taxes was not an option as early as their February meeting.
Biden has ruled out using the 14th Amendment to raise the debt ceiling on his own for the time being, but Democrats in the House have said that they have all agreed to a legislative discharge process that would compel a vote on the debt ceiling.
Nevertheless, in order to tip the balance in favor of the plan, they need five Republicans to defect from their party.
Now that the pandemic emergency has been formally canceled, they are almost certain to recover the $30 billion in COVID-19 monies that have not yet been used.
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