The Congressional Budget Office has warned there is a “significant risk” that the US government will be unable to “pay all of its obligations” in the first two weeks of June if the debt ceiling is not raised.
The intervention by the government spending watchdog reinforces US Treasury secretary Janet Yellen’s warning that the federal government could be heading towards an unprecedented default as soon as June 1.
The CBO projection will pile pressure on the White House and congressional leaders to reach a deal on raising the debt ceiling in the coming weeks.
President Joe Biden earlier this week met Republican Speaker of the House Kevin McCarthy and other top lawmakers in the Oval Office. But a second meeting of the leaders, originally planned for Friday, was postponed to next week amid negotiations among White House and congressional staffers.
While one person familiar with the meetings called the change in schedule a “positive development” and insisted talks about raising the debt ceiling were “progressing”, the two sides remain publicly at odds about the way forward. Democrats have called for a “clean” bill to raise the borrowing limit without preconditions. Republicans insist any raising of the debt ceiling must be tied to steep spending cuts.
McCarthy at a press conference late on Thursday accused Biden of not wanting to strike an agreement, saying: “Apparently, President Biden doesn’t want a deal, he wants a default.”
McCarthy is walking a political tightrope as he seeks to build consensus among Republicans in the House of Representatives. The party controls the lower chamber of Congress by a razor-thin margin after predictions of a “red wave” in last November’s midterm elections failed to materialise.
McCarthy came under more pressure earlier this week when Donald Trump, the former president and current frontrunner for the Republican party’s nomination for president in 2024, urged House Republicans to let the US default unless Democrats capitulate to demands for “massive” spending cuts.
In a televised town hall on CNN on Wednesday night, Trump dismissed warnings from the Treasury, IMF and other leading economists that a default would be “catastrophic” for the global economy.
“It’s really psychological more than anything else,” Trump said. “And it could be really bad, it could be maybe nothing, maybe it’s a bad week, or a bad day, who knows?”