Treasury now says it could run out of money June 5, buying time for debt ceiling talks – CNBC
By alexandreFinance
Treasury now says it could run out of money June 5, buying time for debt ceiling talks – CNBC
The US Treasury could run out of money by June 5, offering more time for debt ceiling talks
The United States Treasury has warned that it could run out of cash by June 5 unless Congress increases the federal borrowing limit. The deadline provides a small window for lawmakers to resolve their differences over the debt ceiling, which could result in dire consequences for the country’s economy if left unresolved.
According to CNBC, Treasury Secretary Janet Yellen sent a letter to House Speaker Nancy Pelosi on Wednesday detailing the urgency of the situation. Yellen stated that the department has been forced to take “extraordinary measures” to prevent a shutdown of the government and other critical funding priorities.
What is the Debt Ceiling?
The United States Congress has the power to control federal government spending. However, there is also a limit to how much money the government can borrow to finance its operations and pay its debts – this is known as the debt ceiling. Essentially, the debt ceiling is a legal limit on the amount of national debt the US government can owe at any given time.
In the past, Congress has had varying opinions on whether or not to raise the debt ceiling, with some lawmakers arguing that it encourages irresponsible spending habits. However, failing to increase the debt limit would have serious consequences, including defaulting on loans, causing the value of the dollar to plummet, and sending shockwaves through global markets.
Why has the Treasury Department warned of running out of money?
The Treasury Department has been relying on emergency measures to keep the government afloat since the debt ceiling was reinstated on August 1, 2019. These measures include reducing the department’s payments into various funds and suspending the sale of certain securities. However, Yellen warned that even these measures won’t be enough to sustain the department beyond early June.
Thus, the Treasury Department has urged Congress to act quickly and increase the debt ceiling, citing the need for the government to continue funding critical functions such as national defense, social security, and Medicare.
What are the potential consequences of failing to raise the debt ceiling?
If Congress fails to act and raise the debt ceiling before the Treasury Department runs out of cash, it could have severe repercussions for the US economy. Defaulting on loans could cause interest rates to spike, making it harder and more expensive for the government and consumers to borrow money. It could also lead to the downgrading of the country’s credit rating, sending shockwaves throughout global markets and causing long-term economic damage.
In addition, failing to raise the debt ceiling could also lead to a government shutdown, which would halt critical services and result in millions of federal employees being furloughed without pay.
Conclusion
The warning from the Treasury Department highlights the urgent need for Congress to raise the debt ceiling to prevent a potentially grave economic catastrophe. Failing to do so would have devastating consequences, not just for the United States but for the entire world. It remains to be seen whether lawmakers can put their differences aside and come to an agreement before the June 5 deadline.
