Debt ceiling worries deepen as early June U.S. default reinforced
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[May 13, 2023]
By Richard Cowan
WASHINGTON (Reuters) - The Washington standoff over raising the U.S.
government's $31.4 trillion borrowing limit is adding to global economic
worries, as a new non-partisan congressional report cited "significant
risk" of a historic default within the first two weeks of June.
The U.S. Congressional Budget Office report, issued Friday morning,
confirms Treasury Secretary Janet Yellen's earlier warnings that a
default could come as early as June 1.
"There is a significant risk that at some point in the first two weeks
of June, the government will no longer be able to pay all of its
obligations," the CBO warned.
Congress' budget scorekeeper also noted that the federal government's
debt payments "will remain uncertain throughout May, even if the
Treasury ultimately runs out of funds in early June."
President Joe Biden and his Democratic colleagues in Congress have urged
prompt action to raise the $31.4 trillion statutory limit on government
borrowing without conditions since the beginning of the year.
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Republicans, who narrowly control the House of Representatives, want new
limits on future spending nailed down before they give the green light
on more payments to cover borrowing on previously enacted spending.
At a meeting of Group of Seven (G7) finance officials in Japan, World
Bank President David Malpass said the looming risk of a default, which
would be the first in U.S. history, was adding to problems facing the
slowing global economy.
"Clearly, distress in the world's biggest economy would be negative for
everyone," Malpass told Reuters on the sidelines of the G7 meeting.
Next week, Biden is scheduled to attend a G7 leaders meeting in Niigata,
Japan, but said this week he could cancel his trip if he and
congressional leaders were not making enough progress toward a debt
limit increase.
White House spokesperson Karine Jean-Pierre told reporters that the
staff-level talks, which started on Tuesday, have been "productive,"
though she declined to provide specifics.
"They're going to meet today, they're going to meet over the weekend. I
think that should kind of tell you that the conversations are going in
the right direction," she added.
A meeting between Biden and Democratic and Republican congressional
leaders that had been tentatively planned for Friday was postponed until
sometime early next week as both sides haggle over what spending could
be cut in the 2024 budget.
The standoff was starting to show its effects outside of Washington. On
Friday, the University of Michigan reported its twice-monthly reading of
consumer sentiment showed households have the bleakest view of the
economy in six months, in no small part thanks to the debt ceiling
showdown.
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The U.S. Capitol building is seen at
sunset after a sixth round of voting for a new Speaker of the U.S.
House failed to elect a new Speaker on the second day of the 118th
Congress at the U.S. Capitol in Washington, U.S., January 4, 2023
REUTERS/Jonathan Ernst
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"Year-ahead expectations for the economy plummeted 23% from last
month," survey director Joanne Hsu said in a statement.
Wall Street, too, has been fretting over a potential default. U.S.
stocks fell after the sentiment data showed households' growing
concerns about the situation, while yields on Treasury securities
maturing in the first half of June remain significantly elevated
relative to later-maturing debt.
While staffs toiled behind closed doors, lawmakers blamed each other
for the turmoil.
"MAGA House Republicans are threatening to default on America's
debts unless we give in to their demands," Biden said in a Friday
tweet, referring to former President Donald Trump's Make America
Great Again movement. Biden warned that Republicans may cut funding
for thousands of jobs, including National Park rangers and
firefighters.
"Mr. President, stop lying," Republican Representative Anthony
D'Esposito tweeted back to Biden, claiming the president was
refusing to negotiate with Republicans in good faith.
Biden and his Cabinet have said repeatedly a default would be
catastrophic. U.S. bonds are the foundation of the global financial
system, and a default would rattle global markets and could trigger
a recession, they warn.
Yellen urged Wall Street leaders and business owners to speak out
about how the fight over the debt limit was affecting economies and
causing "a grave level of uncertainty," she told Bloomberg TV on the
sidelines of the G7 meetings in Japan. She also said she remained
optimistic that the debt limit problem would be resolved.
Yellen intends to discuss the current impasse next week with leading
bankers. A senior Treasury official told Reuters she would do that
with board members of the Bank Policy Institute lobby group.
With the battle in Washington dragging on, one House Democrat
floated an idea that might get lawmakers' attention.
![](http://archives.lincolndailynews.com/2023/May/13/images/ads/current/hampton_sda_PROMGRAD_2023.png)
Democratic Representative Abigail Spanberger said members of the
U.S. Congress ought to have their paychecks withheld until the debt
limit problem is resolved.
(Reporting by David Lawder, Moira Warburton, Richard Cowan, David
Morgan and Lucia Mutikani in Washington, Andrea Shalal in Niigata,
Jarrett Renshaw in Philadelphia and Daniel Burns in New York;
Editing by Heather Timmons and Richard Chang)
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