White House intensifies pressure for debt talks before May 16 meeting.

The Biden Administration Warns of Possible Default on Nation’s Financial Obligations

The Biden administration has released a pair of statements highlighting the urgency of budget ceiling negotiations set for May 16. Treasury Secretary Janet Yellen notified Congress that the Treasury would lack the funds to meet all U.S. financial obligations by early June if the debt ceiling were not increased. Yellen further raised the temperature in remarks to a group of independent community bankers, stating that a U.S. default would generate an economic and financial catastrophe.

The U.S. Economy Hangs in the Balance

President Joe Biden and House Speaker Kevin McCarthy have been in a standoff over the $31.4 trillion debt ceiling since January. Republicans have proposed lowering discretionary spending to the 2022 level while increasing spending for defense, veterans affairs, and homeland security. However, the GOP plan would require cutting nearly all non-defense discretionary spending by nearly one-third, according to Shalanda Young, director of the Office of Management and Budget.

Time to Act is Now

Young said Republicans appear to be withholding information about their proposal, but their position will become clear when appropriations bills are released next week. She added that the U.S. economy hangs in the balance, and there is no time to waste. Congress should address the debt limit as soon as possible to preserve the full faith and credit of the United States.

• Traders have become more reluctant to hold government debt that matures in early June
• A U.S. default would generate an economic and financial catastrophe
• The GOP plan would require cutting nearly all non-defense discretionary spending by nearly one-third

House Republicans may protest, but the math is what the math is, Young wrote. The livelihoods of millions of Americans hang in the balance, and there is no time to waste. Congress should address the debt limit as soon as possible to preserve the full faith and credit of the United States.