Debt Ceiling Due
With rising uncertainty limiting market movement, a persisting risk to the American economy has just had its due date pushed sooner. The United States Secretary of Treasury Janet Yellen recently claimed that the newest projection for the deadline on U.S.’s borrowing limit depicts a date that is just four weeks away. On June 1st, the U.S. risks defaulting on its debt, a cataclysmic event that would be the first in national history. The reason for the debt ceiling’s expedition comes after weaker-than-expected tax receipts, depleting the Treasury’s budgets and in turn advancing the timeline. The consequential news forced President Biden to call for a meeting between the big four congressional leaders on May 9th.
The reason for such haste comes after a month-long battle between the Republican and Democratic parties, where issues over spending have thwarted any proposals from coming into fruition. With the Republican’s gaining majority control over Congress, a forced stand-off has occurred until advancement towards spending reductions is made from the Democratic party. With ongoing debates, there has been little to no progress made to a mutual agreement. This has, however, occurred on numerous occasions in the past several decades, with either side sacrificing spending to reach an ultimatum. Nevertheless, the $31.4 trillion debt ceiling has less than a month to be raised, where if otherwise, immense unemployment and fiscal contraction could trigger a deep and prolonged recession.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.