Treasury Secretary Janet Yellen warned congressional leaders that the country could default as early as June 1, the exact date she predicted in her letter to Congress two weeks ago, in an update to her forecast on when the United States might run out of money to pay the bills.
Even though the June 1 deadline is two weeks away, White House and congressional leaders have only recently begun discussing the debt limit.
“[W]e still estimate that Treasury will likely no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” Yellen wrote.
She informed lawmakers that her projection contains significant uncertainty because the country’s cash flow “could vary” from the department’s points in light of receipts, outlays, and debt.
Since the United States reached the $31.4 trillion debt ceiling in January, the Treasury Department has been using extraordinary measures to help pay the bills.
Asserting that “the actual date Treasury exhausts extraordinary measures could be a number of days or weeks later than these estimates,” Yellen promised a further update for next week.
Even the potential for default has an effect. For securities maturing in early June, according to Yellen, borrowing costs have already “increased substantially” for the Treasury.
The day before Mr. Biden is scheduled to depart for Japan, Tuesday’s meeting between President Biden and congressional leaders will focus on the debt ceiling. Last week, he spoke with them at the White House, but a second meeting on Friday was canceled while staff-level negotiations went on.
House Speaker Kevin McCarthy said on Monday, “nothing’s moved.” Additionally, he stated that the parties in negotiations needed to come to a deal this weekend and that they were “nowhere near any of that.”
B) McCarthy: If you look at the timeline to pass something in the House and pass something in the Senate, you’ve got to have something done by this week, and we are nowhere near any of that. And so this is why February 1 I went to the president. We should not be in this situation
— Chad Pergram (@ChadPergram) May 15, 2023
However, President Joe Biden expressed a more optimistic outlook. “I really think there is a desire on their part as well as ours to reach an agreement, and I think we’ll be able to do it,” On Sunday, Biden made a statement.
In an interview with the Wall Street Journal published on Saturday, Yellen sounded upbeat and said she had been informed that there might be some areas of agreement.
Lael Brainard, director of the National Economic Council at the White House, described the talks as severe and fruitful on “Face the Nation” on Sunday.
You can also take a look at the tweet provided by Genevieve Roch-Decter, CFA, below:
BREAKING: Janet Yellen says it’s now “highly likely” the U.S runs out of cash early June.
This is a circus. pic.twitter.com/PQyc6VcY9i
— Genevieve Roch-Decter, CFA (@GRDecter) May 22, 2023
Clawbacks of unused COVID funds, a quicker permitting process, and the addition of work requirements for some social programs are possible areas of compromise. While increasing the debt ceiling does not authorize additional spending, it enables the government to pay its obligations.
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Like the Treasury timeline, the Congressional Budget Office published its own analysis of the so-called X-date on Friday.
In the first two weeks of June, if Congress did not take action, there was a “significant risk” that the government would no longer be able to pay all of its bills.
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