New X date is June 5, Treasury says
The United States will likely have enough reserves to avoid a potential debt default until June 5, according to Treasury Secretary Janet Yellen. In a letter addressed to House Speaker Kevin McCarthy, Yellen stated that Treasury will not have enough resources to meet the government’s obligations if Congress does not raise or suspend the debt limit by that date. The announcement comes as negotiations between the White House and congressional Republicans appear to be closing in on a compromise agreement to raise the debt ceiling for two years. The markets closed higher on Friday, optimistic that a deal would be passed by the House and Senate and signed by the president before June 1. However, officials warned that Friday was seen as the last possible day to reach a deal and still have enough time to craft it into legislation and pass it in the House and Senate before the previous “X-date” of June 1.
FAQs:
What is the debt ceiling?
The debt ceiling is the maximum amount that the US government can borrow to fund its operations. It is set by Congress and the US Treasury Department and currently stands at $28.4 trillion.
What happens if the debt ceiling is not raised?
If the debt ceiling is not raised or suspended, the US government will be unable to borrow more money to pay for its expenses, including its debt obligations. This could trigger a default on US debt, which would have severe consequences for the US economy and the global financial system.
What are the consequences of a US debt default?
A US debt default could drive up interest rates and undermine confidence in the US dollar. Economists note that America’s adversaries, particularly Russia and China, are closely watching the current debt limit standoff and would benefit if trust in the US dollar were to erode.
What is being done to raise or suspend the debt ceiling?
Negotiations are currently underway between the White House and congressional Republicans to reach a compromise agreement to raise the debt ceiling for two years. However, Friday was seen as the last possible day to reach a deal and still have enough time to pass it in the House and Senate before the previous “X date” of June 1.
According to Treasury, June 5 has been announced as the new date.
Treasury Secretary Janet Yellen has stated that the United States will likely have enough reserves to avoid a possible default until June 5. Yellen wrote to House Speaker Kevin McCarthy, “We now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5”. This will provide some breathing room for negotiations between the White House and congressional Republicans, who appear to be closing in on a compromise agreement to raise the debt ceiling for two years. The last time the so-called “X date” was updated was on May 1, and this latest update marks the first time since January that the secretary has not used the phrase “as early as” when mentioning a date. However, this new date comes amid growing concerns about the United States’ credit rating and the potential systemic risks that could arise from brinkmanship over the federal debt ceiling. If the United States technically defaults, it could drive up interest rates and undermine confidence in the U.S. dollar.