Washington (AP) —The government is likely to face default from mid-October to mid-November, a Washington think tank said Friday, issuing a warning from the Treasury earlier this week. The “X Date”, the day Treasury Secretary Janet Yellen runs out of the maneuver room to avoid reaching debt limits if Congress does not act, occurs weeks
Washington (AP) —The government is likely to face default from mid-October to mid-November, a Washington think tank said Friday, issuing a warning from the Treasury earlier this week.
The “X Date”, the day Treasury Secretary Janet Yellen runs out of the maneuver room to avoid reaching debt limits if Congress does not act, occurs weeks after the start of the new budget year on October 1. increase. It may not reach until mid-November, according to the Bipartisan Policy Center.
Shy Akabas, director of economic policy at the center, said: .. “But this train could get off the rails shortly thereafter.”
Yellen wrote to parliamentary leaders this week saying that without government action, the United States would not be able to circumvent the default in October.
Yellen has adopted what the law considers to be “special measures” to prevent the government from functioning and reaching debt limits. The debt limit came into effect on August 1, after being suspended for two years.
With a current limit of $ 28.4 trillion, Yellen is using bookkeeping operations to reduce investment in various government trust funds, such as the Civil Service Pension Fund, below the debt limit.
When these resources are exhausted, the government can no longer pay its invoices, even repay US debt, and the country becomes the default for the first time in history.
Such events will shock the global financial system, as US Treasuries are considered the safest investment in the world.
Republicans supported Donald Trump when he was president, but said he had no plans to support raising debt limits. Republicans said Democrats should raise or suspend their debt limits using the budget adjustment process used by President Joe Biden’s $ 3.5 trillion infrastructure bill. It can be done without a Republican vote.
But on Wednesday, Speaker of the House Nancy Pelosi said the Democratic Party would not include a debt limit hike in the settlement bill. It is expected that the temporary spending bill, which must be passed before the start of the new budget year on October 1, will include debt restrictions. If that measure does not pass, the government will face partial government outlook. Closed until Congress approves New Year funding.
According to a policy center analysis, when the debt limit came into effect on August 1, the Treasury had about $ 400 billion worth of cash to make room below the debt cap to meet government spending needs. Various bookkeeping measures were available. ..
However, the center said those resources were nearing depletion.
“If the Treasury runs out of these resources, it will pay military payments, veterans’ interests, Medicare provider payments, and many other payments,” said the Center’s analysis. “Exceeding the debt limit X date is an unprecedented event and poses significant risks to financial markets and the global economy.”
Parliament has never been unable to address debt limits before default, but in 2011 a budget conflict between the Obama administration and Republicans approached default, and credit rating agency Standard & Poor’s financed. We have downgraded some of the provincial securities. AAA rating, something that has never happened before.
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