The United States risks defaulting on its debt as early as June 1, Treasury Secretary Janet Yellen announced on Monday. The one-month ...
The United States risks defaulting on its debt as early as June 1, Treasury Secretary Janet Yellen announced on Monday.
The one-month estimate appeared in a letter sent to leaders in Congress, where Republicans and Democrats have been engaged in political fighting over raising the debt ceiling.
“In my January 13 letter, I noted that it was unlikely that cash and extraordinary measures would be exhausted before early June. After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” Yellen said.
“This estimate is based on currently available data, as federal receipts and outlays are inherently variable, and the actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates,” Yellen added.
Yellen notified Congress in January that the United States had hit the statutory limit of roughly $31.4 trillion and advised that her agency take “extraordinary measures” so the government could continue to pay its bills, but only in the short term.
Since that time, experts have warned of a default this summer that could cripple the U.S. economy without a deal to raise the borrowing limit for the federal government, which the Treasury Department says Congress has acted upon 78 times since 1960.
On Wednesday, the GOP-led House narrowly passed a bill called the “Limit, Save, Grow Act of 2023,” which would suspend the debt ceiling through March 31, 2024, or until an increase in debt of $1.5 trillion — whichever comes first — in exchange for a host of spending cuts. The Congressional Budget Office projected the proposal would slash federal deficits by $4.8 trillion over ten years.
President Joe Biden and his fellow Democrats have insisted on a “clean” debt ceiling bill separate from any spending cuts or any policy concessions. Meanwhile, House Speaker Kevin McCarthy (R-CA) has pushed for negotiations.
Earlier on Monday, Majority Leader Chuck Schumer (D-NY) announced the Senate would hold hearings on the bill starting on Thursday to “expose the true impact of this reckless legislation on everyday Americans.”
After Yellen released her letter, the White House announced that Biden had called congressional leaders, including McCarthy and Schumer, to invite them to a meeting at the White House on May 9.
Yellen said it is “impossible to predict with certainty the exact date when Treasury will be unable to pay the government’s bills, and I will continue to update Congress in the coming weeks as more information becomes available.”
Though Yellen said her agency is continuing to take action by suspending the issuance of State and Local Government Series Treasury securities, she warned Congress that time is of the essence.
“We have learned from past debt limit impasses that 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 wrote. “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.”
Yellen concluded: “I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible.”
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