On Thursday of next week June 1st, the US government is scheduled to make its monthly payment of about $25 billion (€23bn) to military personnel, civil servants and social security recipients.
In the middle of the month interest payments, usually about $3 billion, fall due, while billions more have to be paid at the end of June.
The problem is that by early June the US government may have run out of money to pay its bills, potentially triggering an unprecedented debt default and domestic and international economic turmoil.
The US treasury is currently limited by law to borrowing no more than $31.4 trillion. Republicans who control the House of Representatives are seeking to leverage their influence over an increase in this debt limit to secure steep cuts in overall government spending.
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On Sunday US president Joe Biden said for the first time that he “could not guarantee that they (the Republicans) will not force a default by doing something outrageous”.
“Much of what they’ve already proposed is simply, quite frankly, unacceptable,” Mr Biden said at a press conference at the end of the G7 summit in Japan.
[ US debt ceiling talks at standstill as Republicans ‘pause’ negotiationsOpens in new window ]
“It is time for Republicans to accept that there is no bipartisan deal to be made solely on their partisan terms. They have to move as well.”
The president argued raising tax revenue had to be part of the equation.
Mr Biden subsequently spoke to Republican leader and speaker of the House of Representatives Kevin McCarthy on what was described as a “productive” call. The two are scheduled to meet on Monday for further talks.
For a number of months the US treasury has been essentially employing accounting techniques to allow it to meet its schedule of payments. However, it is coming perilously close to reaching the limit of such activities.
The exact time when the US would run out of money is fluid. If the treasury can get by until the middle of June an influx of tax receipts could push the “X date”, as it is known, out by another few weeks.
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Treasury secretary Janet Yellen, who predicted several weeks ago that the US could be unable to pay its bills by the beginning of June, is expected to update Congress this week.
In the meantime talks between the Biden administration and Republicans, aimed at avoiding any debt default, appear to be going backwards.
And the bickering and the finger pointing between the parties is getting worse.
The president indicated some Republicans were trying to crash the economy by not raising the debt ceiling in a bid to sabotage his re-election prospects in 2024. He suggested there were some hardline Republicans “who know the damage that it would do to the economy, and because I am president, and the president’s responsible for everything, Biden would take the blame”.
Mr Biden appeared to argue that invoking the 14th amendment of the US constitution to allow the government to bypass Congress and continue to issue debt could be a viable legal strategy but not practical given the current timescale.
Republican leaders blamed the Biden administration for the impasse.
“The White House is moving backward in negotiations, Republican speaker Kevin McCarthy said. He told reporters the White House actually “wants to spend more money than we spent this year”.
The White House said Republicans had tabled an offer that represented “a big step back and contained a set of extreme partisan demands that could never pass both Houses of Congress”.
Various US media have reported that the sides are divided on the nature, scale and duration of spending cuts. It is reported that Republicans have proposed increases in military spending, benefits for veterans and border security, meaning that there would be deeper cuts elsewhere while extending tax cuts from the Trump era.
[ US debt default would be the lunatics taking over the asylumOpens in new window ]
The latest White House offer would hold military and other spending – which includes education, scientific research and environmental protection – at current levels, which would represent a cut in real terms given inflation.
The White House proposal would set spending caps for two years as against six urged by Republicans.
Republicans also reportedly, want new work requirements for recipients of some federal social programmes as well as a cut in funding for the US revenue service.
