On May 18, 2021, the United States Treasury Secretary Janet Yellen announced that the default date for the country has been pushed back to June 5. This news comes as a relief to many Americans who were worried about the potential consequences of a default.
A default occurs when a country is unable to pay its debts. In the case of the United States, this would mean that the government would be unable to pay its bills, including Social Security payments, military salaries, and interest on its debt. This would have a significant impact on the economy and could lead to a recession.
The original default date was set for May 31, but Yellen was able to push it back by using what is known as “extraordinary measures.” These measures include suspending investments in certain government funds and using cash reserves to pay bills. Yellen has stated that these measures will only provide temporary relief and that Congress needs to act to raise the debt ceiling.
The debt ceiling is a limit on the amount of money that the government can borrow. It is set by Congress and has been raised numerous times in the past. However, there is currently a political stalemate in Congress over raising the debt ceiling. Republicans are refusing to vote for an increase unless Democrats agree to spending cuts, while Democrats argue that the debt ceiling needs to be raised to pay for programs that have already been approved.
If Congress does not act to raise the debt ceiling, the United States could still default on its debts after June 5. This would have serious consequences for the economy and could lead to a global financial crisis.
In addition to the potential economic consequences, a default would also damage the reputation of the United States as a reliable borrower. This could lead to higher interest rates on future loans and make it more difficult for the government to borrow money in the future.
In conclusion, while the news that the default date has been pushed back to June 5 is a relief, it is important to remember that this is only a temporary solution. Congress needs to act to raise the debt ceiling to avoid a default and the potential economic consequences that come with it. It is important for both parties to come together and find a solution that will ensure the financial stability of the country.
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- Source: https://zephyrnet.com/yellen-extends-earliest-potential-us-default-date-to-june-5/
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