The US could run out of cash to pay its lenders as soon as 8 June unless policymakers agree to lift the debt ceiling, top Wall Street economists have estimated.
It is expected that the emergency measures the US Treasury has been leaning on to meet its short-term debt obligations could run dry in just under three weeks, according to investment bank Goldman Sachs.
America’s debt ceiling is a cap imposed on government spending which determines how much the world’s largest economy can borrow.
It’s currently set at around £25 trillion. Failing to push it higher would likely result in the US defaulting on a huge chunk of its debts.
Such a scenario is expected to push the US dollar lower, raise interest rates globally and trigger a recession across the pond. Its negative effects are likely to ripple through the global economy.
US Treasury officials have said the country will be unable to pay all its debts on 1 June unless there’s upward movement on the debt cap.
Goldman’s warning comes ahead of crunch talks between Democrat President Joe Biden and top Republican Kevin McCarthy.
Biden told reporters on the way back from the G7 summit in Japan that he thinks “it’s time for Republicans to accept that there is no bipartisan deal to be made solely, solely on their partisan terms. They have to move as well.”
McCarthy characterised a telephone conversation with Biden over the weekend as productive.
“I think we can solve some of these problems if he understands what we’re looking at,” he told reporters.
A standoff between the Republicans and Democrats over how high to set the debt isn’t uncommon. It was last raised in December 2021 after weeks of the two sides butting heads.