Whether the federal government can avoid a catastrophic default could depend on just seven days in May. It highlights the great threat posed by partisan conflict.
U.S. Treasury Secretary Janet Yellen told lawmakers on Wednesday that the Treasury Department could run out of special fiscal measures to keep the federal debt below the ceiling as early as June 1. Between now and then, US President Biden and members of both houses of Congress will be in Washington at the same time for a week.
It is possible that Congress will cancel the Memorial Day adjournment and that Mr. Biden will not attend the G7 Hiroshima summit to be held this month. Even then, there is little time left. It is unlikely that the Republicans and Democrats will reach a deal before Day X, which Yellen has pointed out, and a short-term response is more likely.
However, it seems difficult to postpone the settlement of the issue until the second half of this year. This is because the Republicans and Democrats have not shown any signs of compromise. While the Democrats are calling for an unconditional increase in the debt ceiling, House Speaker McCarthy has announced that he will not agree to an unconditional increase out of consideration for the Republican hardliners who are calling for significant spending cuts. Financial market turmoil may be needed to force the deeply divided parties to come to an agreement.
A short-term extension is also not an easy political option. Either Republicans backtrack on their pledges to oppose an unconditional debt ceiling hike, or Democrats make concessions and set a precedent before serious negotiations.
“Given how little time is left for Congress, it is clear that unconditional suspension of the debt ceiling is the only realistic way to avoid default,” said Jean-Pierre, a spokesman for the president. ‘, he repeated his usual stance.
Market pressure for a deal does not appear to be strong enough at this point. Still, there are signs of concern in some corners of the bond market. U.S. Treasury bills, which mature in early June, yield above 5%. By contrast, bonds that mature in May are much lower, with July maturities yielding well below 5%.
President Biden will hold a meeting on Thursday to discuss the debt ceiling issue with congressional leaders. House Speaker McCarthy will also attend.
Original title:Urgent US Debt-Limit Deadline Raises Chance of a Short-Term Fix(excerpt)