US Treasury Secretary Janet Yellen warned that inaction on the debt ceiling would "cause severe hardship." The previous estimate for a potential debt default was June 1.US Treasury Secretary Janet Yellen on Friday updated the nation's debt default deadline to June 5, later than was previously estimated.

Also Read | US: Yellen Extends Debt Default Deadline to June 5.

Yellen had previously said a default could happen as early as June 1.

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The extension buys more time for Democratic President Joe Biden and Republican Speaker of the House Kevin McCarthy to negotiate to raise the federal government's self-imposed $31.4 trillion (€29.3 trillion) debt ceiling and avert a potentially disastrous default.

However, Yellen said the extended deadline does not make the situation any less urgent.

"Waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States," she said in a letter to McCarthy.

"If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests."

Biden said late on Friday the deal was "very close."

"I'm hopeful we'll know by tonight whether we're going to be able to have a deal," Biden told reporters at the White House.

'Crunch time'

McCarthy on Friday acknowledged that it was "crunch time."

He and Biden have been holding talks to raise the debt ceiling, with Republicans hoping to secure cuts to the president's aggressive spending plans, not least his flagship Inflation Reduction Act program

"I thought we made progress yesterday," he said.

"I want to make progress again today. And I want to be able to solve this problem."

Voting to raise the debt ceiling was once a routine act by Congress each year, but more recently it has become a form of political leverage where other measures are tacked onto the bill.

zc/wd (AFP, AP, Reuters)

(The above story first appeared on LatestLY on May 27, 2023 04:20 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).