On May 16th, Mukherjee, Director of the Division of Economic Policy and Analysis at the United Nations Department of Economic and Social Affairs, stated that the ongoing banking crisis and US debt crisis in recent times could still have spillover effects and impact the global economy to some extent.
According to reports from Reuters and Bloomberg, US President Biden and House Speaker McCarthy held their third meeting as the debt default deadline looms. Treasury Secretary Yellen warned that the Treasury is likely to run out of cash by June 1st, giving them only 10 days to avoid the first-ever US debt default.
Biden expressed optimism at the meeting, emphasizing the need to address tax loopholes, an area where he and Republicans differ. McCarthy agreed that the US debt is too large and acknowledged the necessity of changing the trajectory.
Earlier discussions between the White House and the Republican negotiating team were described as productive by McCarthy. However, he emphasized the urgency of reaching an agreement on the debt ceiling within the week to allow Congress enough time to take action and prevent a debt default.
In a letter to Congress, Treasury Secretary Yellen reiterated the consequences of not raising the debt ceiling. She stated that without an increase, the Treasury is likely to be unable to meet all government payment obligations by early June, triggering a debt default on June 1st.
The US government has been grappling with long-standing deficits and relies on issuing bonds to sustain its financial operations. The total US debt had reached $31 trillion as of October last year, approaching the debt ceiling of $31.4 trillion. The impending debt ceiling has limited the Treasury’s ability to sell additional bonds and acquire funds for daily operations.
The US Treasury has repeatedly warned of the dire implications of a cash shortage, emphasizing that a debt default would not only impact the global economy but also undermine the US’s position as a global economic leader.