The United States has denied rumors about having a backup plan to postpone payments as it nears the June 1 deadline.
As the United States approaches a potential debt default, the Treasury Department had reportedly been considering the option of postponing upcoming payments to prevent a severe default situation. However, the Biden administration has now dismissed these rumors of a contingency plan.
US Denies Having Contingency Plan Amid Debt Default Concerns:
According to a report from the Wall Street Journal (WSJ), officials at the Treasury Department had been making preparations for the potential delay of certain payments after June 1. With the deadline drawing near and Congress yet to raise the debt limit, the Treasury was exploring the possibility of payment delays until it had enough funds to cover all daily expenses. While discussions about this plan occurred within the government, no instructions were given to agencies to change their payment processes.
Previous reports indicated that the Treasury Department had contacted federal agencies to discuss the possibility of delaying payments scheduled before early June. The idea was to postpone payments until June 15, leveraging the anticipated influx of quarterly tax payments to acquire additional funds. This approach could have extended the default deadline into July, providing temporary relief and allowing for additional financial measures to prevent an immediate default.
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Growing Pressure on Debt Ceiling Mounts:
Government officials are preparing for the potential scenario where Congress does not raise the borrowing limit of around $31.4 trillion on time. Treasury Secretary Janet Yellen has repeatedly stressed the urgency for swift action from Congress to prevent a financial crisis. In a letter sent to lawmakers on Monday, Yellen cautioned that the United States might be unable to fulfill all its financial commitments as early as June 1 if decisive steps were not taken.
As part of the contingency planning, Treasury officials have been working together with agencies to evaluate their payment needs. David Lebryk, the fiscal assistant secretary of the Treasury, sent a memo earlier this month instructing agencies to inform the Treasury of any significant upcoming payments. This communication aims to ensure that the Treasury is aware of large payments in advance, which could help bolster its funds before the due date.
Economists and market experts have continuously warned that if a deal is not reached by June 1, it could result in significant consequences, such as a market crash and a growing recession. Additionally, extending the deadline could create instability in both the US stock market and the crypto market. This uncertainty surrounding a potential default scenario could leave investors grappling with unpredictability and doubt.
With time running out, the financial stability of the United States is uncertain, placing urgency on the need for a quick resolution in the ongoing debt ceiling negotiations between the Biden administration and the Republicans.
Important: This article is intended solely for informational purposes. It should not be considered or relied upon as legal, tax, investment, financial, or any other form of advice.