According to U.S. Treasury Secretary Janet L. Yellen, by June 5, the United States won’t be able to make its payments on schedule.
In a letter to House Speaker Kevin McCarthy, Ms. Yellen stated, “We now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if the debt limit has not been raised or suspended by June 5.”
Following Ms. Yellen’s report, negotiators have more time to reach a consensus on increasing or suspending the country’s debt ceiling.
According to prior statements made by the Treasury Secretary, the United States may not have enough money on hand by June 1 to cover its debt.
The most precise date for when the United States is likely to run out of money was provided in Ms. Yellen’s letter.
The secretary’s revelation comes as the White House and House Republicans scramble to reach an agreement that would increase the nation’s $31.4 trillion borrowing cap and avert a financial crisis. The Treasury Department achieved the legal debt ceiling on January 19. Since then, “extraordinary measures” have been implemented in the form of accounting fraud to ensure that the United States can continue to pay its debtors on schedule.
The letter from Ms. Yellen to Congress, which provides a little flexibility, does an excellent job of highlighting the dire financial situation that the Treasury is in. Almost the first two days of June, the federal government is slated to pay nearly $130 billion, including money to veterans, Social Security recipients, and Medicare beneficiaries.
These payments will leave the Treasury Department with “an extremely low level of resources.”
“Our projected resources would be inadequate to satisfy all of these obligations,” Ms. Yellen said in the letter.
Patrick McHenry, a prominent member of the discussions and a Republican congressman from North Carolina, asserted that the Treasury Department’s more specific timeframe places further pressure on the negotiators.
Even before receiving the letter, according to Mr. McHenry, he knew there was not much time left to prevent a default.
“Due to the timeframe, we must arrive during the final hours. I’m not sure if that will happen in the next day, two days, or three days, but everything has to come together,” he remarked.
Since months ago, Ms. Yellen has been warning Congress that the United States could not have enough cash at the beginning of June to pay all of its commitments.
The Treasury secretary made a commitment earlier this week to try to be more evident in her following briefings addressing the likely timeframe of default. Because they don’t think bankruptcy might be imminent, House Republicans have asked that the Treasury secretary appear before Congress and provide her full analysis.
The debt ceiling, often referred to as the debt limit, sets a limit on the total amount of money the federal government is allowed to borrow through U.S. Treasury instruments, such as bills and savings bonds, to satisfy its financial commitments. The United States has a budget deficit, meaning it must borrow money to pay its obligations.