Yellen warns U.S. could default on debt as early as June 1
Treasury Secretary Janet Yellen said Monday the U.S. government might not be able to pay its bills as early as June 1 if Congress does not raise or suspend the debt limit.
"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," Yellen wrote in a letter to lawmakers.
Her warning comes as Republican lawmakers and the Biden administration appear to be no closer to reaching a deal on the debt than they were at the beginning of the year, when she first started raising alarms about a looming crisis.
Later Monday, President Joe Biden called the four congressional leaders to discuss the debt limit and invited them to meet next week, on May 9 to discuss the debt ceiling, as well as the 2024 fiscal year budget.
In response to Yellen's letter, House Speaker Kevin McCarthy retorted that the House had acted, "and there is a bill sitting in the Senate as we speak that would put the risk of default to rest." He added, "The Senate and the President need to get to work — and soon."
Several Senate Republicans said Yellen's letter on the debt ceiling should prompt Mr. Biden to engage in negotiations on addressing the debt ceiling.
"I think Janet Yellen is just carrying his water to try to convince people that he doesn't need to be in the room," Republican Senator Shelley Moore Capito of West Virginia said.
Asked if Senate Republicans could support a clean debt ceiling hike — that is, with no other legislation attached — Texas Sen. John Cornyn said he and his colleagues would not because it "won't pass the House, won't pass the Senate."
Democratic Senator Brian Schatz, of Hawaii, said he believes that Democrats should not cut a deal with Republicans to prevent default.
"The premise here is that there should be no policy concessions in exchange for preventing default, and that no political party ever should threaten to collapse the American economy just to enact their policy prescriptions," Schatz said.
Yellen first wrote to Congress in January to let them know that the U.S. would have to begin using so-called "extraordinary measures" to pay the bills. At the time, she said that the U.S. could go into default as soon as June if Congress did not act, though she did not at that time specify when in June this could occur. Yellen said it would be impossible to offer an exact date but said she'd continue to update Congress.
"Given 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," Yellen wrote.
She also warned lawmakers against waiting until the last minute to reach an agreement, writing that they learned from previous debt limit impasses that it 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."
"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," Yellen wrote.
Economists have been closely monitoring revenues coming in as the debt limit loomed. Earlier this year, the Bipartisan Policy Center estimated the so-called "x-date" would land at some time during the summer or early fall, but with tax receipts down in last month, some bank economists started to move up their timelines on when the nation could default.
The Congressional Budget Office also said Monday that it, too, estimates the Treasury Department is at "a significantly greater risk" of running out of funds in early June because tax receipts were lower than it had anticipated in February.
Weijia Jiang contributed to this report.
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CBS News reporter covering economic policy.
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