In her second letter to Congress in two weeks, Treasury
Secretary Janet Yellen confirmed that the agency will be
unlikely to meet all U.S. government payment obligations by
early June, triggering the first-ever U.S. default. The debt
ceiling could become binding by June 1, she said.
The new date reflects further data on revenues and payments
received since Yellen's told Congress on May 1 that Treasury
would likely run out of cash to pay government bills in early
June, and potentially as early as June 1. It comes a day before
U.S. President Joe Biden is expected to meet House Speaker Kevin
McCarthy for talks, and ahead of an overseas trip for the
President that starts Wednesday.
The actual date Treasury exhausts extraordinary measures could
be a number of days or weeks later than these estimates, Yellen
said in today's letter, a shift from May 1's letter that warned
only of " She said she will provide an additional update to
Congress next week as more information becomes available.
Biden travels to Japan on Wednesday for a Group of Seven
leaders summit, then to Australia, a trip that will take about a
week. McCarthy said Monday there had been no progress in
marathon talks at the staff level throughout the weekend.
Yellen has repeatedly warned that failure by Congress to raise
the $31.4 trillion federal debt limit could spark a
"constitutional crisis" and would unleash an "economic and
financial catastrophe" for the U.S. and global economies.
The non-partisan Congressional Budget Office last week said the
United States faces a "significant risk" of defaulting on
payment obligations within the first two weeks of June without a
debt ceiling hike, with payment operations uncertain throughout
May. Some analysts, including the Congressional Budget Office,
have suggested that Treasury could last as long as August
without a default if it can access June 15 quarterly tax
payments and new borrowing measures that become available June
30.
Yellen urged action as soon as possible in Monday's letter.
"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," Yellen said. She said
Treasury’s borrowing costs had already increased substantially
for securities maturing in early June
"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," she said.
(Reporting by Andrea Shalal and David Lawder; Editing by Heather
Timmons)
