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Thursday, June 1, 2023

United States Denies Plans Of Stalling Payments As Debt Default Looms

United States Denies Plans Of Stalling Payments As Debt Default Looms – According to reports, the Treasury Department of the United States had been seeking information from government agencies regarding the feasibility of postponing upcoming payments as a measure to prevent a disastrous default as the country neared the brink. Nevertheless, the Biden administration has officially dismissed these speculations of a backup plan on Thursday.

As per a WSJ report, Treasury officials had been discreetly making preparations for potentially postponing specific payments beyond June 1. As the deadline drew near and Congress had not yet raised the debt limit, the Treasury aimed to secure flexibility by contemplating payment delays until it accumulated adequate funds to cover all daily expenses. 

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Although discussions regarding this strategy had occurred throughout the government, no directives were issued to agencies to modify their payment protocols. Previous reports indicated that the Treasury had contacted federal agencies to investigate the possibility of postponing payments scheduled before early June. The aim was to delay these payments until June 15, leveraging the anticipated influx of quarterly tax payments to potentially acquire supplementary funds. 

Such an approach could have extended the default deadline into July, offering momentary respite and enabling the implementation of additional accounting measures to avert an imminent default. Federal officials are preparing themselves for the potential scenario in which Congress fails to raise the borrowing limit of approximately $31.4 trillion in a timely manner. 

Treasury Secretary Janet Yellen has consistently stressed the urgency of prompt action from Congress to prevent a financial catastrophe. In a letter sent to lawmakers on Monday, Yellen cautioned that if decisive measures were not taken, the United States could face an inability to fulfill all its financial obligations as early as June 1. However, with contingency planning, Treasury officials have been working together with agencies to evaluate their payment requirements. 

David Lebryk, the Treasury’s fiscal assistant secretary, issued a memo earlier this month urging agencies to inform the Treasury about any significant impending payments, which could augment the agency’s funds before the due date. Economists and market experts have repeatedly warned that the failure to reach a deal by June 1 could result in severe consequences, including a potential market crash and an emerging recession. 

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Moreover, even extending the deadline itself could introduce volatility in both the US stock market and the crypto market, as investors grapple with uncertainty stemming from the looming possibility of default. As time ticks away, the financial stability of the United States hangs precariously, underscoring the need for swift resolution in the ongoing debt ceiling discussions between the Biden administration and the Republicans.

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