"Payment Possible for Social Security and Pensions on the 1st-2nd of Next Month"
The X-Day, the deadline for a potential U.S. debt default initially set for the 1st of next month, has been postponed to the 5th. Although negotiations between President Joe Biden and the Republican Party on raising the debt ceiling have made some progress toward an agreement, major points of contention remain. Both sides have agreed to continue compromise efforts throughout the weekend.
According to Bloomberg on the 26th (local time), Treasury Secretary Janet Yellen sent a letter to Congress stating, "If Congress does not raise the debt ceiling by the 5th of next month, it is expected that the government will not have sufficient resources to meet its payment obligations."
Secretary Yellen noted that the Treasury can meet the upcoming $130 billion (approximately 173 trillion won) payments for Social Security and military pensions due on the 1st or 2nd of next month but warned, "This spending will leave the Treasury's cash balance at an extremely low level."
By postponing the anticipated default deadline from the 1st to the 5th, they have effectively gained four additional days.
The White House and the Republicans, who reportedly made some progress in negotiations the previous day, continued working on a deal through practical talks on this day as well. Representative Patrick McHenry, leading the Republican negotiation team, emphasized, "Although the date has been slightly pushed back to the 5th, reaching an agreement remains urgent."
House Speaker Kevin McCarthy, a Republican, told reporters that "progress was made in the working-level negotiations last night," indicating that the talks have reached a critical point. McCarthy added, "Work will continue until a final agreement is reached," and explained, "Negotiations will continue today as well."
Earlier, both sides made some progress negotiating a plan to raise the current $31.4 trillion (approximately 42 quadrillion won) debt ceiling in exchange for cutting federal government spending over two years. Under the new agreement terms, the difference between the amounts each side demands for discretionary spending?budget items Congress has discretion over?has narrowed to $70 billion (approximately 93 trillion won).
The U.S. budget is divided into discretionary and mandatory spending. Discretionary spending is budgeted and reviewed at the discretion of the executive branch and Congress. Mandatory spending is based on laws, so Congress does not have control over it. Only discretionary spending is subject to increases or decreases each fiscal year by congressional resolution.
The Biden administration has advocated freezing discretionary spending this year, while the Republicans have pushed for a return to 2022 levels. According to federal government statistics, U.S. discretionary spending in 2022 was $1.7 trillion, accounting for 27% of total spending of $6.27 trillion. About half of discretionary spending is defense-related.
Another source explained, "Negotiators agree on the total amount of discretionary spending, including defense, but will leave specific decisions on detailed items like housing and education to Congress."
The New York Times (NYT) also reported that there is consensus on raising the debt ceiling for two years while limiting all federal government spending except for defense and veterans' affairs.
Although the postponement of the default deadline to the 5th of next month provides more time for negotiations, considering internal persuasion and procedural steps for bill passage, the timeline remains tight.
Congress will be in recess until Memorial Day, the U.S. holiday on the 29th. In the House of Representatives, a mandatory three-day review period for bill passage is being considered, so given that negotiations are not yet finalized, the physical deadline remains pressing.
President Biden has also entered Memorial Day holiday mode. On this day, he left for Camp David to rest and plans to stay at his Wilmington residence starting on the 28th.
As he left the White House, President Biden said, "(The negotiations are) very optimistic," and added, "I expect to know by tonight."
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