Treasury’s Yellen Says June 5 is Last Date for Debt Ceiling to be Raised – On Friday, U.S. Treasury Secretary Janet Yellen established a specific deadline for raising the federal debt limit, emphasizing that if Congress fails to increase the $31.4 trillion debt ceiling by June 5, the government will default. While Yellen had previously mentioned the possibility of a default occurring as early as June 1, she now identifies June 5 as the exact deadline.
“We now estimate that the Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5,” she wrote. The revised deadline provides some additional time for White House and congressional negotiators to reach a final agreement on increasing the legal limit on the federal government’s borrowing capacity.
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While Democratic and Republican negotiators made progress on Friday, they continued to face challenges in resolving contentious issues. In a communication addressed to Congress, Yellen stated that her department is set to make payments totaling over $130 billion in the initial two days of June, which includes payments to veterans, Social Security recipients, and Medicare beneficiaries.
“During the week of June 5, Treasury is scheduled to make an estimated $92 billion of payments and transfers, including a roughly $36 billion quarterly adjustment toward Social Security and Medicare trust funds, ” Yellen wrote. “Therefore, our projected resources would be inadequate to satisfy all of these obligations,” she said. Furthermore, Yellen disclosed that on Thursday, the Department of the Treasury employed an exceptional cash management measure to mitigate the risk of default.
This involved executing a swap of around $2 billion worth of Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank. By implementing this measure, the Treasury Department was able to postpone the potential default date. Yellen noted that this particular measure had previously been employed in 2015 during similar circumstances.