May 28, 2023

The US Treasury announces a possible default and says it only has the resources to repay the debt until June 1st

Janet Yellen said it was “highly likely” that the agency would not be able to meet all of its payment obligations to the US government.

WASHINGTON, May 22 (Reuters) – The US Treasury reiterated on Monday that it expects to be able to pay US government bills only through June 1 without an increase in the debt limit, leaving just 10 days for White House negotiators and congressional Republicans to reach an agreement.

In her third letter to Congress in three weeks, Treasury Secretary Janet Yellen said it was “highly likely” that the agency would not be able to meet all of the US government’s repayment obligations by early June, possibly by June 1, without congressional action raising the debt limit of $31.4 trillion, which would result in the first default in US history.

“With one more week of information now available, I am writing to inform you that we estimate that it is very likely that the Treasury Department will no longer be able to meet all of the Government’s obligations if Congress fails to raise or suspend the debt limit by early June, possibly by June 1.” .

Yellen said the estimates, in line with her last letter to Congress on May 15, are based on currently available data, but that federal revenue, spending and debt may vary. She said she would update Congress as more information became available.

Follow up on recommendations

US President Joe Biden, who cut short his trip to Asia to negotiate a debt-reduction deal, is scheduled to meet House Republican Leader Kevin McCarthy at 5:30 p.m. after aides met for more than two hours on Monday.

McCarthy told reporters that the talks were “on track” ahead of the meeting.

Yellen has repeatedly warned that Congress’ failure to raise the federal debt limit will lead to “economic and financial disaster” for the economies of the United States and the world.

She stated that the Treasury’s borrowing costs had already increased and urged Congress to act as quickly as possible to avoid negative consequences that could arise even before a default.

“We have learned from past confrontations over debt limits that waiting until the last minute to suspend or raise a debt limit can do serious damage to business and consumer confidence, increase short-term borrowing costs for taxpayers, and have a negative impact on the credit rating of the United States.”