In a letter addressed to the Republican speaker of the House of Representatives, Kevin McCarthy, and made public by the Treasury, Ms. Yellen said that the wall of debt could be reached "as early as June 1".

"Our best estimate is that we will no longer be able to meet all of the government's obligations in early June, and potentially as early as June 1," she wrote to the Republican leader.

This does not mean a default next month but the United States, which until now had been able to avoid closing services by playing on the various accounting lines, would find itself in a much more precarious economic situation this time.

In concrete terms, the Treasury would be forced to choose between its various constrained expenditures, which could force it to severely limit some, particularly those relating to health or pension benefits, in order to be able to continue to meet its obligations relating to its next debt maturities.

"It is impossible to predict with certainty the exact date when the Treasury will no longer be able to pay government bills and I will continue to keep Congress informed in the coming weeks as information becomes available," Yellen added.

In a statement, the Congressional Budget Office (CBO) confirmed the Treasury's estimates, judging that "to the extent that the income tax campaign was weaker than initially anticipated, we now believe that there is a significantly higher risk that the Treasury will no longer have the necessary funds by early June."

The US Congress must regularly vote to raise the federal government's debt ceiling, a procedure carried out 78 times since the early 1960s, most often without particular debate.

Race against time

But this year, Republicans, who have had a slight majority in the House since early 2022, refuse to give what they consider to be a blank check in favor of the Biden administration and instead want an increase in this ceiling to be coupled with a drastic cut in federal spending.

But the federal government reached its ceiling of 31,000 billion dollars in mid-January, forcing the Treasury to take a first series of measures, above all accounting, in order to remain at the level reached.

On the side of the White House, Joe Biden has repeatedly said that the increase in the ceiling must be carried out unconditionally, believing that the debt was the result of the policies carried out in the past by all administrations, from both parties.

In a statement, the presidency announced that Biden called Kevin McCarthy on Monday to invite him to a meeting on Tuesday, May 9, with top Democratic and Republican congressional officials in attendance.

Last Wednesday, the House of Representatives voted on a text proposed by Mr. McCarthy providing for a $4.500 trillion cut in federal spending over the next ten years in exchange for an increase in the ceiling of $1.500 trillion, or a review clause on March 31, 2024, which would make debt one of the main themes of the presidential campaign for the November elections of the same year.

"After three months of inaction by the Biden administration, the House has acted, and a bill that would end the risk of default is waiting for the Senate to take it up as we speak," McCarthy said in a statement Monday. "The Senate and the president need to get to work, and fast."

But the text is unlikely to be voted on by the Senate, which is controlled by the Democrats by a slight majority.

"It's time to put aside partisan interests and do what is right and necessary for the American people and avoid the first government default that would crash markets, raise costs for families and jeopardize their retirement savings," Democratic congressional leaders Chuck Schumer (Senate) and Hakeem Jeffries (House) said in a joint statement Monday.

The two parties, however, must reach an agreement quickly: the current parliamentary session provides for only 12 days of debate on Capitol Hill between now and June 1.

A default "would cause an economic and financial catastrophe," warned Yellen on April 25.

© 2023 AFP