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Last week, US Republicans voted to raise the national borrowing limit with drastic cuts as they sought a showdown with President Joe Biden, a Democrat, over “excessive” spending.
While the US hit its US$31.4 trillion borrowing limit in January, the Treasury has taken extraordinary measures that allow it to continue financing the government’s activities.
If the debt ceiling is not raised or suspended by Congress before current tools are exhausted, the government risks defaulting on payment obligations, with profound implications for the economy.
“Our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” said Yellen in a letter addressed to House Speaker Kevin McCarthy and other leaders.
“Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments,” she said.
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