Yellen warns that debt ceiling measures may run out by June

  • Treasury Secretary Janet Yellen warned in a letter to House Speaker Kevin McCarthy that the United States may fail to meet its debt obligations sooner than expected.
  • Yellen said the drop in tax receipts means the US could reach its debt ceiling as soon as June 1, ahead of Wall Street and Washington estimates.
  • The Treasury Secretary’s letter adds pressure to stalled talks between President Joe Biden and House Republicans on how to avert what would be the first US debt default.

US Treasury Secretary Janet Yellen listens during the signing ceremony for the Indonesia Infrastructure and Financial Agreement, at the International Monetary Fund headquarters in Washington, D.C., on April 13, 2023.

Stephanie Reynolds | AFP | Getty Images

Treasury Secretary Janet Yellen warned on Monday that the United States may run out of measures to repay its debt obligations by June 1, earlier than the government and Wall Street expected.

In a letter to House Speaker Kevin McCarthy, Yellen said new data about tax receipts forced the department to raise its estimate when “the Treasury will not be able to meet all of the government’s obligations” until “early June, possibly as early as June 1, if it does not raise.” Congress or suspend the debt limit before that time.”

This date is earlier than Wall Street economists expected. Goldman Sachs’ latest estimate this week put the deadline at some point in late July, though the bank’s economists acknowledged that weaker-than-expected tax receipts could move that timetable higher.

The Congressional Budget Office also revised its estimate for the so-called X date on Monday.

“Because tax receipts through April were lower than what the Congressional Budget Office projected in February, we now estimate that there is a much greater risk that the Treasury will run out of money in early June,” CBO Director Phill Swagel wrote.

The combination of Yellen’s speech and the appreciation of the new community organizations added a new sense of urgency to the stalled negotiations between President Joe Biden and McCarthy’s Republican majority in the House of Representatives.

McCarthy was in Israel on Monday, addressing the Knesset, the country’s parliament.

The White House has so far refused to participate in the talks as long as McCarthy insists that the debt ceiling vote be tied to Republican plans for sweeping cuts in federal spending.

Yellen’s letter comes less than a week after a Republican bill raising the debt limit and cutting government funding passed the House, but only after McCarthy made 11th hour changes in order to win over holdout Republicans.

Goldman Sachs estimated that so far there have been few ripples in the markets from rising debt-related risks. But that could change, analysts wrote, “once the Treasury Department announces a specific congressional deadline for raising the debt limit.”

CNBC’s John Milloy contributed to this story.

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