The United States Treasury began on Thursday to take measures to prevent the government debt defaultas Congress heads into a high-stakes showdown between Democrats and Republicans over the debt limit hike.
Those “extraordinary measures” can help reduce the amount of outstanding debt subject to the limit, currently set at $31.4 trillion, but the Treasury warned that these tools would only help for a limited time, likely no more than six months.
“I respectfully urge Congress to act quickly to protect America’s full guaranteesaid the Treasury Secretary, Janet Yellenin a letter addressed to the speaker of the House of Representatives, the Republican kevin mccarthy.
Yellen, the Treasury officer in Democratic President Joe Biden’s government, had said last week that “failure to meet government obligations would cause irreparable damage to the American economy, the livelihoods of all Americans, and global financial stability.” .
A default would damage the credibility of the United States, something that should never happen, warned the executive president of the JPMorgan Chasethe main bank of the country.
“We should never question the solvency of the United States government,” Jamie Dimon said in an interview with the network CNBC. “That is sacrosanct. It should never happen.”
risky and dangerous
The world’s largest economy could face serious disruption, with opposition Republicans threatening to reject an increase in the legal debt ceiling, could push the US into default.
Far-right Republicans, who now hold key power in the party’s narrow majority in the House of Representatives, want Biden to agree to cut public spending.
They argue that sweeping cuts are needed to reduce borrowing, which Congress has generally agreed to increase each year, raising the so-called debt ceiling.
But the White House has said that those cuts would affect key military and social security spending programsor they would imply important new taxes.
The White House also vowed that Biden would not negotiate with hardline Republicans given their “risky and dangerous” opposition to raising the debt ceiling.
For now, the Treasury would not be able to fully invest a portion of the Civil Service Disability and Retirement Fund, with a “debt hold period” lasting until early June.
Treasury will also stop further investment of amounts credited to the Postal Service Retiree Health Benefit Fund, Yellen said in announcing the latest measures.
The Treasury will begin to reduce its cash balances and resort to accounting techniques and tools to allow the government to continue its functions, it said. mickey levyfrom Berenberg Capital Markets.
But according to this analyst, the probability that the US government defaults on its debt is close to zero.
“I think ultimately … there will be an agreement to raise the debt ceiling, but from time to time there will be a lot of debate and spiteful politics,” Levy told the AFP.
However, if things continue as they are, spending will continue to rise and increase debt, he said, adding that a large portion goes to programs like Social Security and federal health insurance Medicare.
“There just isn’t the political will to really tackle these programs,” he said.
With information from AFP
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