US Treasury Secretary Janet Yellen has sounded the alarm on the country's finances, warning that the US could run out of cash by 1 June if Congress fails to raise or suspend the debt ceiling. The debt ceiling is the limit on the amount of money the government can borrow to fund its operations and pay its debts.
Failure to raise the debt ceiling would mean that the US government would be unable to borrow any more money, leading to a possible default on its obligations. This would be the first default in US history, and it could have catastrophic consequences for the global financial markets and the US economy.
House Republicans have demanded drastic spending cuts and a reversal of some aspects of President Biden's agenda, including his student loan forgiveness programme and green energy tax credits, in exchange for votes to raise the debt ceiling. The Republicans' stance has drawn criticism from the Democrats, who accuse them of holding the country hostage to their right-wing agenda.
Experts have warned that a default could lead to a recession and rising unemployment, as investors would lose confidence in the US as a reliable business partner. The debt ceiling has been raised, extended or revised 78 times since 1960, but the current political climate makes it uncertain whether Congress will act in time to prevent a default.
To avoid a government default, the Treasury Department has begun "extraordinary measures", such as suspending investments in certain funds and drawing down cash balances in government accounts. However, these measures will only buy the government a few more months before it runs out of options.
The Treasury plans to increase borrowing through the end of the quarter ending in June, totalling about $726bn - about $449bn more than projected earlier this year. This increased borrowing is necessary to fund the government's operations and pay its debts, but it will also add to the country's already massive debt burden.
The US is facing a critical financial situation, and time is running out for Congress to act. Janet Yellen's warning should be taken seriously, as failure to raise the debt ceiling could have severe consequences for the US economy and the global financial system. It is time for both parties to put aside their differences and work together to find a solution that will protect the country's financial future.