US Could Default as Soon as June 1, Says Treasury Secretary Yellen

Treasury Secretary Janet Yellen notified Congress on Monday that the U.S. may default on its debt as early as June 1, if legislators don’t elevate or droop the nation’s statutory borrowing authority earlier than then.

In a letter to House and Senate leaders, Yellen urged congressional leaders “to protect the full faith and credit of the United States by acting as soon as possible” to deal with the $31.4 trillion restrict on its authorized borrowing authority. She added that it’s not possible to foretell with certainty the precise date of when the U.S. will run out of money.

“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 in the letter.

Also Monday, the Congressional Budget Office reported that it saw a greater risk of the U.S. running out of funds in early June. CBO Director Phillip L. Swagel said because of less-than-expected tax receipts this filing season and a faster IRS having processed already received returns, “Treasury’s extraordinary measures will be exhausted sooner than we previously projected.”

In January, Yellen sent a letter to congressional leaders, stating that her department had begun resorting to “extraordinary measures” to avoid a federal government default.

The Treasury said Monday it plans to increase its borrowing during the April to June quarter of this year, even as the federal government is close to breaching the debt limit.

The U.S. plans to borrow $726 billion during the quarter. That’s $449 billion more than projected in January, due to a lower beginning-of-quarter cash balance and projections of lower-than-expected income tax receipts and higher spending.

While Russia’s invasion of Ukraine remains a burden on U.S. economic growth, Treasury officials say the debate over the debt ceiling poses the greatest risk to the U.S. financial position.

Eric Van Nostrand, acting assistant secretary for economy policy, said in a statement that “even if Congress ultimately raises the debt limit before a default occurs, the ensuing uncertainty could raise borrowing costs and induce other financial stress that would weaken our labor market and our standing in the world.”

“There is not any time to waste,” stated Shai Akabas, director of financial coverage on the Bipartisan Policy Center, which forecasts the so-called X-date when the federal government exhausts its extraordinary measures. His group will even present an up to date X-date projection within the coming days, he says.

“The U.S. government is again within mere months or even weeks of failing to make good on all its obligations. That is not a position befitting of a country considered the bedrock of the financial system, and only adds uncertainty to an already shaky economy.”

Democrats and the White House are pushing for Congress to extend the federal debt restrict. President Joe Biden desires the cap raised with out negotiation. The House Republican majority has most not too long ago handed a invoice to safe spending cuts in change for a debt restrict improve.

Yellen stated final week, on the Cap-to-Cap coverage convention in Washington that “Congress must vote to raise or suspend the debt limit, and it should do so without conditions and it should not wait until the last minute. I believe that is a basic responsibility of our nation’s leaders to get this done.”

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