U.S. Treasury Secretary Janet Yellen has warned that the Treasury will not be able to pay all of the government’s debt “as early as June 1, if Congress does not raise or suspend the debt limit before that time.” Yellen also cautioned that the U.S. defaulting on its debt obligations “would produce an economic and financial catastrophe.”
U.S. Debt Default Could Happen by June 1, Says Yellen
United States Secretary of the Treasury Janet Yellen warned Monday that the U.S. government may default on its debt by June 1, which is earlier than the government and Wall Street had expected. In a letter to House Speaker Kevin McCarthy, Yellen wrote:
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.
She clarified that the Treasury Department’s estimate of when it could default on the government’s debt obligations is “based on currently available data,” noting that “It is impossible to predict with certainty the exact date when Treasury will be unable to pay the government’s bills.”
However, she stressed that based on the current projections, “It is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments.”
Emphasizing that “waiting until the last minute” to take action “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,” Yellen warned:
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.
Congressional Budget Office Similarly Estimates U.S. Debt Default Could Happen in June
The Congressional Budget Office (CBO) has also revised its estimate of when the U.S. government could default on its debt obligations. The federal agency announced Monday:
Because tax receipts through April have been less than the Congressional Budget Office anticipated in February, we now estimate that there is a significantly greater risk that the Treasury will run out of funds in early June.
On Monday, President Joe Biden called McCarthy and three other congressional leaders — Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, and House Democratic Leader Hakeem Jeffries — to invite them to a meeting on May 9 at the White House to discuss the debt limit, a White House official told NBC.
Yellen warned last week that the U.S. defaulting on its debt obligations “would produce an economic and financial catastrophe,” emphasizing that it “would raise the cost of borrowing into perpetuity” and “future investments would become substantially more costly.”