Treasury Secretary Yellen Warns US Could Default on Its Debt by June 1 – Janet Yellen, the U.S. Treasury Secretary, has issued a warning that unless the debt limit is raised or suspended by Congress before June 1, the Treasury will be unable to pay off all of the government’s debt. Yellen emphasized that defaulting on these obligations would result in severe economic and financial consequences.
This announcement came as a surprise to both the government and Wall Street, as Yellen is suggesting that default could occur sooner than previously anticipated. 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.” The Congressional Budget Office (CBO) has updated its projection for the possible date of the U.S. government’s 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.”
A White House official informed NBC that President Joe Biden reached out to four congressional leaders, including House Minority Leader Kevin McCarthy, Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, and House Democratic Leader Hakeem Jeffries, to invite them to a meeting at the White House on May 9 to discuss the debt limit.
This invitation follows Treasury Secretary Yellen’s recent warning that defaulting on the U.S. government’s debt obligations would result in severe economic and financial consequences, including perpetually increased borrowing costs and significantly more expensive future investments.