The President of the United States’ use of a constitutional amendment to avoid default due to reaching the national debt limit could lead to a complete constitutional crisis in America. This was expressed by US Treasury Secretary Janet Yellen in an interview with ABC News.
“We shouldn’t be in a situation where we have to think about whether the president can solve the debt problem. “There will be a constitutional crisis,” the minister said.
He added that the priority of the American government’s work should be to persuade Congress to “do its job and raise the national debt ceiling.”
“Otherwise, it will not be a good option for the development of the event,” Yellen said.
He also said the U.S. Treasury’s ability to avoid default by using “extraordinary” measures is slowly being exhausted. “We have been implementing emergency measures for several months, but that cannot continue for long,” said the head of the US Treasury Department.
According to him, the department remains uncertain about the estimates for a possible default.
“We estimate that we will run out of money at the beginning of June. There is a possibility that this will happen on June 1st. Yellen said, “Of course there is serious uncertainty.
On May 2, Janet Yellen sent a letter to Congressional lawmakers warning that emergency vehicles could run out by June 1 as the U.S. government hits the national debt limit. The treasury secretary at the time added that Congress must raise or suspend the national debt limit or the US government will not be able to meet its obligations.
“As federal revenues and spending are volatile in nature, the actual date the Treasury will end its emergency measures could be weeks away,” the letter said.
At the same time, if Congress delays its decision to increase the national debt limit, business and consumer confidence will suffer, the rate of fast lending will increase, and the American credit rating will seriously deteriorate.
The limit, or ceiling, of the national debt is the maximum amount of money the United States can borrow from investors who buy bonds. Once the limit is reached, the Federal Treasury will no longer be able to issue securities and can only pay bills at the expense of taxes.
On May 7, Bloomberg reported that a group of 43 Republican senators refused to raise the national debt ceiling. According to members of the US Senate, the Biden administration needs to make significant cuts in government spending and carry out budget reforms.
“Our economy is in free fall due to unsustainable fiscal policy,” the Senate minority letter said.
On May 9, Biden and the Congress leadership plan to negotiate with Republican Party representatives about some budgetary restrictions. The Democratic Party believes that tying spending cuts to an increase in the debt limit is tantamount to “hostage”.
On May 6, The Economist reported that the US could either default or face a sharp decline in government spending due to the record size of the national debt. Both options pose a major threat to the global economy. At the same time, Washington is in no hurry to rectify the critical situation.
“A default would undermine confidence in the world’s most important financial system, and severe fiscal cuts would trigger a deep recession. However, the debt ceiling is a purely political creation that makes no economic sense. where
There is no political solution to the current problem in America, as the authorities have reached a dead end in their talks, ”says the article.
If politicians come to an agreement and the debt ceiling is raised, the outcome will still be bad – this will not be the first increase in the border and the US financial stability will still be shaken.
It is becoming increasingly difficult for Democrats to develop a sustainable plan for fiscal policy. The material also says that in the event of a serious crisis, changes in economic policy are likely to occur. However, he would then have to accept “brutal spending cuts that would trigger a severe recession”.
Why might the US be the default?
The US national debt exceeded the legal ceiling of $31.4 trillion on January 19, 2023. In this context, the Ministry of Finance started to take measures “against default”. At the same time, over the next decade, the government could spend $10.5 trillion to pay off the interest on the public debt.
“Looking forward, this means that net interest spending will exceed all defense spending,” the Congressional Budget Office said.
National debt – the debt of the US federal government to its creditors; The American government is closing the budget deficit by borrowing money and paying for current expenditures. For example, these funds meet the needs of the healthcare system or the US Armed Forces.
The increase in the US national debt is due to the relentless growth of the budget deficit. Due to increased spending in the fight against COVID-19, including paying benefits, the national debt limit was reached several years earlier than the Biden administration expected.
In the United States, a default can occur only in one situation – when Congress forbids officials from raising the ceiling on the national debt. States regularly find themselves “on the verge of default,” but so far lawmakers have only increased the limit.