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Thursday, February 2, 2023

Opportunities for lifting the debt limit are narrowing, warns an influential think tank.

The United States will face default sometime between December 21 and January 28 next year unless Congress takes action to raise or suspend the debt ceiling, the Bipartisan Politics Center warned on Friday.

The forecast was a narrower window than the non-partisan think tank previously unveiled last month, and the group suggested that the actual deadline, or date X, may be at the earlier end of that range.

This time around, Democrats and Republicans appear to have toned down their tone in the wake of the latest standoff over debt caps, but there is currently no plan to lift the borrowing cap. Republicans continue to insist that Democrats must go it alone to tackle this problem, while Democrats argue that raising the borrowing limit is a shared responsibility given that both political parties have been heavily indebted over the past few years.

“Those who believe that debt limitation can safely be sidelined in the December accumulation in the legislative framework are misinformed,” said Shai Akabas, director of economic policy at BPC. “Congress is flirting with financial disaster if it goes on vacation without solving the debt limit problem.”

Treasury Secretary Janet L. Yellen warned lawmakers in November that the United States may be unable to pay its bills shortly after December 15.

Speaking before the Senate Banking Committee this week, she highlighted the urgency of the issue.

“I cannot overemphasize how important it is for Congress to address this issue,” said Ms Yellen. “America must pay its bills on time and in full. If we don’t, we will destroy our current recovery. ”

Approaching the first default in American history, Congress increased its statutory debt limit by $ 480 billion in October, which the Treasury Department estimates will allow the government to continue borrowing until early December.

The Center for Bipartisan Politics said there is additional uncertainty over this year’s debt limit due to the pandemic and various economic aid programs that are still ongoing.

December 15th is especially important because the Treasury Department is required to contribute $ 118 billion to the Highway Trust Fund. If the corporate tax revenue due that day turns out to be weak, the Treasury could face a monetary crisis and the United States will not be able to fully meet all of its obligations, such as paying social security and funding military salaries.

The Congressional Budget Office said earlier this week that it expects the Treasury to run out of cash by the end of December unless Congress takes action. However, the CBO suggested that the Treasury could defer some payments to the highway trust fund, which were stipulated in the recently passed infrastructure law, potentially preventing default until around January.

World Nation News Desk
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