Fact: The US debt hit the ceiling already in January
Formally, the US hit the debt ceiling – of 31,400 billion dollars – already in January. But the Ministry of Finance has since been able to pay for itself by shuffling around existing resources. However, Finance Minister Janet Yellen has warned that at the beginning of June it will no longer be possible to handle the payments in this way. If this is true, the US could be three weeks away from suspended payments right now.
The consequences would be dramatic and force drastic political measures. Most expect the US to make every effort to continue meeting its interest payments and repayments – to avoid a catastrophe in global financial markets.
The austerity that would be necessary without new loans would therefore hit retirees and other beneficiaries within the US social security system very hard and also mean suspended payments to suppliers and ongoing operations – including defense. This scenario would create a deep recession in the world’s largest economy, according to SEB’s economists.
Sources: Bloomberg, SEB, The Wall Street Journal.
“We don’t have an agreement yet, but I felt that the discussion was productive in areas where we have different views,” said Kevin McCarthy, the speaker of the House of Representatives, on his way out of the White House late Monday night, local time.
President Joe Biden met with McCarthy for further negotiations on a solution to the debt ceiling issue.
— We both talked about the need for a bipartisan agreement, Biden said at the start of the meeting.
Biden emphasized that he was optimistic about getting further in the talks during the evening.
If no agreement is reached before June 1, the US government risks suspending its payments, which many warn could trigger a new financial crisis.