Treasury Secretary Janet L. Yellen reiterated on Monday that the United States may not be able to pay its bills by June 1, an announcement that keeps the pressure on the White House and congressional leaders as they negotiate how to increase the country’s debt limit.
The warning to Congress comes as President Biden and spokesman Kevin McCarthy are due to meet Monday afternoon at the White House to try to resolve the impasse. Representatives of Biden and McCarthy were involved in negotiations last week to craft a plan that would limit federal spending and reduce the deficit, while raising the $31.4 trillion borrowing limit.
Yellen warned that the country’s finances remain in a precarious state, saying it was “highly likely” that the United States would run out of cash in early June, rather than her earlier letters calling that deadline “likely”.
“With another week of information now available, I am writing to note that we estimate that it is highly likely that the Treasury will no longer be able to meet all government obligations if Congress fails to act to raise or lift the debt limit by early June. and potentially as early as June 1st,” Yellen wrote.
In her previous letter, issued a week ago, Yellen cautioned that her estimates could be off due to the unpredictability of government tax collections. She said the actual date when the Treasury will exhaust the so-called extraordinary measures it is using to postpone a default “could be a few days or weeks later.”
On Monday, Yellen did not suggest there could be more time and warned that failing to raise the debt limit would be disastrous for the economy.
“If Congress does not raise the debt limit, it would cause severe hardship for American families, undermine our global leadership position, and raise questions about our ability to defend our national security interests,” Yellen said.
The country’s cash balance is dangerously low. On Sunday, Yellen dismissed hopes that the so-called extraordinary measures she has been using to postpone a default will be enough to keep the government running normal operations beyond mid-June.
Republicans have refused to raise the debt limit without spending cuts, forcing Democrats to the negotiating table to avoid a default that could trigger a recession and financial crisis. The two sides remain far apart on key issues, including limits on federal spending, new work requirements for some recipients of federal anti-poverty assistance and funding intended to help the Internal Revenue Service crack down on tax evasion by high earners and corporations.
The Treasury secretary said over the weekend that failure to raise the debt limit would force the government to face difficult choices about how to meet the country’s financial obligations. Benefit payments to retirees and veterans are likely to be disrupted, and the uncertainty could cause interest rates to rise and stock prices to plummet.
The Biden administration played down the idea that it could essentially ignore the debt cap and keep borrowing by invoking the 14th Amendment, which says the validity of US debt must not be questioned. While government lawyers have studied the idea, officials believe the expected legal challenges and uncertainty would destabilize markets.
“There can be no acceptable results if the debt ceiling is not raised,” Yellen said on NBC’s “Meet the Press.”
