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Treasury Secretary Janet Yellen Warns of Severe Hardship as Debt Ceiling Deadline Extended to June 5

Treasury Secretary Janet Yellen has announced that the projected debt ceiling deadline has been extended to June 5, providing an additional four days to address the critical issue. However, Yellen emphasized the urgent need for action in a letter to Congress, warning that inaction on raising the borrowing limit would "cause severe hardship." This update comes as Congress breaks for the long Memorial Day weekend, adding further pressure to resolve the impending crisis.

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Yellen's letter to legislators highlighted the employment of an extraordinary measure not utilized since 2015 to maintain the United States' financial stability until this point. The "X-date" marks the point when the government exhausts its existing measures to stretch available funds, leading to a significant shortfall in meeting its financial obligations. This critical deadline, which could have severe economic ramifications both domestically and globally, arrives when the government lacks a sufficient financial cushion to cover all its bills.

House Speaker Kevin McCarthy acknowledged the urgency of the situation earlier on Friday, stating that Republican debt negotiators and the White House were facing a "crunch" time. Their objective was to reach an agreement with President Joe Biden to curtail federal spending and increase the nation's borrowing limit before the fast-approaching deadline. The negotiators had aimed to finalize a deal by the end of the weekend, hoping to conclude weeks of challenging discussions.

According to the Treasury Department, the government could potentially run out of money as early as a week from Monday, setting the stage for a potentially catastrophic default with far-reaching economic consequences. As lawmakers left for the long holiday weekend, retirees and social service groups expressed anxiety, making contingency plans in case of a default. The next round of Social Security checks is scheduled to go out in the coming week, heightening concerns among vulnerable populations.

"The world is watching," emphasized International Monetary Fund Managing Director Kristalina Georgieva after meeting with Yellen. With the clock ticking, the urgency of the situation was palpable, as the country finds itself in the proverbial 12th hour. President Biden and Speaker McCarthy have been working diligently to bridge their differences and finalize a two-year agreement that would not only rein in federal spending but also extend the legal borrowing limit beyond the upcoming presidential election year.

The success of any agreement rests on achieving a political compromise that garners support from both Democrats and Republicans in the divided Congress. McCarthy acknowledged the gravity of the situation as he arrived at the Capitol, stating, "We know it's a crunch," while recognizing the need for further progress. Meanwhile, President Biden, in his remarks at the White House honoring the Louisiana State University champion women's basketball team, expressed confidence in one of his top negotiators, noting that she is actively working on "putting together a deal, hopefully."

The impending debt ceiling deadline has raised concerns among experts and policymakers, who stress the importance of avoiding a catastrophic default that could have far-reaching consequences for the economy. The pressure is on for Congress and the White House to find a bipartisan solution and ensure the financial stability of the United States while averting severe hardship for its citizens. The coming days will be critical in determining whether a timely agreement can be reached to address the nation's borrowing limit and prevent a potential financial crisis.


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