The Washington standoff over raising the United States government’s $31.4 trillion borrowing limit is adding to global economic worries, as a new non-partisan congressional report has cited a “significant risk” of a historic default within the first two weeks of June.

The US Congressional Budget Office report, issued Friday morning, confirms Treasury Secretary Janet Yellen’s earlier warnings that a default could come as early as June 1.

“There is a significant risk that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations,” the CBO warned.

Congress’ budget scorekeeper also noted that the federal government’s debt payments “will remain uncertain throughout May, even if the Treasury ultimately runs out of funds in early June”.

President Joe Biden and his Democratic colleagues in Congress have urged prompt action to raise the $31.4 trillion statutory limit on government borrowing without conditions since the beginning of the year.

Republicans, who narrowly control the House of Representatives, want new limits on future spending nailed down before they give the green light on more payments to cover borrowing on previously enacted spending.

At a meeting of Group of Seven (G7) finance officials in Japan, World Bank President David Malpass said the looming risk of a default, which would be the first in US history, was adding to problems facing the slowing global economy.

“Clearly, distress in the world’s biggest economy would be negative for everyone,” Malpass told Reuters on the sidelines of the G7 meeting.

Next week, Biden is scheduled to attend a G7 leaders’ meeting in Niigata, Japan, but said this week he could cancel his trip if he and congressional leaders were not making enough progress towards a debt limit increase.

White House spokesperson Karine Jean-Pierre told reporters that the staff-level talks, which started on Tuesday, have been “productive,” though she declined to provide specifics.

“They’re going to meet today, they’re going to meet over the weekend. I think that should kind of tell you that the conversations are going in the right direction,” she added.

A meeting between Biden and Democratic and Republican congressional leaders that had been tentatively planned for Friday was postponed until sometime early next week as both sides haggle over what spending could be cut in the 2024 budget.

Bleak view

The standoff was starting to show its effects outside of Washington. On Friday, the University of Michigan reported its twice-monthly reading of consumer sentiment showed households have the bleakest view of the economy in six months, in no small part thanks to the debt ceiling showdown.

“Year-ahead expectations for the economy plummeted 23 percent from last month,” survey director Joanne Hsu said in a statement.

Wall Street, too, has been fretting about a potential default. US stocks fell after the sentiment data showed households’ growing concerns about the situation, while yields on Treasury securities maturing in the first half of June remain significantly elevated relative to later-maturing debt.

While legislative staffs toiled behind closed doors, lawmakers blamed each other for the turmoil.

“MAGA House Republicans are threatening to default on America’s debts unless we give in to their demands,” Biden said in a Friday tweet, referring to former President Donald Trump’s Make America Great Again movement. Biden warned that Republicans may cut funding for thousands of jobs, including National Park rangers and firefighters.

“Mr. President, stop lying,” Republican Representative Anthony D’Esposito tweeted back to Biden, claiming the president was refusing to negotiate with Republicans in good faith.

Biden and his Cabinet have said repeatedly a default would be catastrophic. US bonds are the foundation of the global financial system, and a default would rattle global markets and could trigger a recession, they warn.

Yellen urged Wall Street leaders and business owners to speak out about how the fight over the debt limit was affecting economies and causing “a grave level of uncertainty,” she told Bloomberg TV on the sidelines of the G7 meetings in Japan. She also said she remained optimistic that the debt limit problem would be resolved.

Yellen intends to discuss the current impasse next week with leading bankers. A senior Treasury official told Reuters she would do that with board members of the Bank Policy Institute lobby group.

With the battle in Washington dragging on, one House Democrat floated an idea that might get lawmakers’ attention.

Democratic Representative Abigail Spanberger said members of the US Congress ought to have their paychecks withheld until the debt limit problem is resolved.