All articles tagged with #government default
Reactions to President Joe Biden's Oval Office speech celebrating the bipartisan agreement to prevent a government default are divided on Twitter. Some praised Biden's leadership and competency, while others made low blows about his age. The agreement raises the debt limit until 2025 and gives legislators budget targets for the next two years. Critics on both sides of the aisle say lawmakers negotiated away too much.
A group of Republican defense hawks in the Senate raised objections to the Pentagon funding levels in the bipartisan bill to suspend the federal debt limit and impose spending caps, threatening to delay passage of the plan that must be enacted by Monday to avoid a government default. The bill, negotiated between Speaker Kevin McCarthy and President Biden, would increase Pentagon spending to $388 billion for next year, a 3 percent raise, when many domestic programs were targeted for cuts in the plan. Despite warnings from leaders of both parties that the Senate needed to act swiftly, some lawmakers said a vote could come Thursday evening but officials cautioned approval might not come until Friday at the earliest.
Federal workers are seeking guidance from the Biden administration on what a debt ceiling calamity might mean for their millions of members, but so far, the official answer has been consistent: We have nothing to tell you. Talks between the White House and House Republicans to raise the country’s borrowing limit approach a June 1 deadline, when the Treasury Department warns that the government might no longer be able to pay its bills. If a default happens, the government could halt many day-to-day operations, from staffing national parks at the start of tourist season to research on the newest coronavirus vaccines at the National Institutes of Health.
Investors are optimistic about a potential deal to raise the debt limit and prevent the federal government from defaulting, as stock futures show modest gains and Treasury bill yields have fallen. Negotiators are reportedly just $70 billion in spending cuts away from a compromise, which could come as soon as Friday, paving the way for Congress to vote as soon as Tuesday. However, it remains unclear whether any such deal has enough support in Congress, with Republicans demanding deeper spending cuts and Democrats warning of a "huge backlash" if the White House caved to Republican demands.
If the US government defaults on its debts, Social Security recipients, particularly the oldest and poorest, will be the first to suffer. The earliest round of payments go to retirees older than 88 years, people with disabilities, and seniors with especially low incomes who are eligible for Supplemental Security Income (SSI). Even a week-long holdup could be devastating for the roughly 27 million Americans who rely on Social Security for most of their income. The blow to Social Security, which accounts for 16% of the country's annual spending, is expected to be particularly debilitating.
Continued uncertainty about a debt-ceiling resolution pushed yields on Treasury bills maturing between early and mid-June toward 6%. The Treasury bill market is in a state of dislocation, with yields ranging from as little as 2.924% to as high as 6.141%. Investors and traders are factoring in at least some risk that the government could cross the X-date without a debt-ceiling resolution. The broader financial market appears relatively more confident that a debt-ceiling agreement can be reached by June 1.
Small business owners in the US are beginning to panic as lawmakers continue to battle over raising the debt ceiling. With the federal government being a major client for many small businesses, delayed payments, stalled projects, and sweeping layoffs could occur if the nation defaults. The consequences of a default could be catastrophic, including 7.8 million lost jobs and a $10 trillion loss in household wealth, according to estimates from Moody’s Analytics. Even if there is a last-minute deal, recent instability has already rocked businesses and added stress at a time when they’re already struggling to deal with high prices, rising borrowing costs, and pullbacks in consumer spending.
A new poll by The Washington Post-ABC News shows that Americans are divided on who to blame if the US defaults on its debt. 39% of Americans would blame Republicans in Congress, while 36% would blame President Biden. Opinions fall sharply along party lines, with Republicans just as likely to blame Biden (78%) as Democrats are to blame congressional Republicans (78%). Due to restrictions on how much the government can borrow and its tendency to spend more than it takes in, the debt limit, or ceiling, has periodically been raised to prevent defaulting on its obligations.
The Biden administration and Capitol Hill leaders are exploring alternative strategies to avoid a government default that could occur as early as June 1, as Republicans demand cuts to federal spending in exchange for supporting raising the debt limit, while Democrats continue to call for a debt-limit increase without any other policy conditions.
US Treasury Secretary Janet Yellen warned of severe economic consequences if the House does not address and raise the debt ceiling. Republicans are demanding dramatic cuts to future spending in exchange for increasing the debt ceiling. The uncertainty of a government default has been highly supportive of gold futures pricing which remains above $2000.
Investors are flocking to the 1-month Treasury bill amid concerns over the U.S. debt ceiling and the possibility of a government default. The bill's yield fell by over half a percentage point on Thursday before recovering slightly on Friday. The ongoing worries have caused investor anxiety and uncertainty in the Treasury market.
The rate on one-month Treasury bills fell almost 0.5% due to concerns about a potential government default by mid-June. The government may run out of money before then unless Congress raises the debt ceiling, as federal tax receipts due on April 18 have come in weaker than expected.
House Speaker Kevin McCarthy plans to make the case on Wall Street for starting a fiscal showdown that carries enormous economic stakes. Republicans have pledged to halt the nation’s ability to borrow to pay its bills, seeking to force President Biden to accept steep spending cuts and other policy concessions. The consequences of congressional inaction — the first-ever government default — could devastate an economy already teetering on the precipice of recession.