The US could default on its obligations as soon as June 1 if Congress doesn’t address the debt limit before then, Treasury Secretary Janet Yellen said Monday.
“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 House Speaker Kevin McCarthy.
The accelerated timetable increases pressure on President Joe Biden and House Republican lawmakers to ramp up their debt ceiling discussions. After months of talks being at a standstill, the president called all four congressional leaders on Monday afternoon and invited them to a May 9 meeting.
Yellen warned that the actual date that Treasury exhausts its ability to pay the government’s bills on time and in full could be “a number of weeks later than these estimates.” She noted that it’s impossible to pinpoint an exact date since the amount of revenue the federal government collects and the amount it spends is variable.
She will continue to update Congress as more information becomes available, but she reiterated that it’s “imperative” that lawmakers act as soon as possible.
“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit 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,” Yellen wrote.
“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,” she continued.
The Congressional Budget Office also updated its forecast on Monday, saying that there is a “significantly greater risk that the Treasury will run out of funds in early June” because of weaker-than-expected tax collections. It had originally projected that the default could happen between July and September.
When the US hit its $31.4 trillion debt ceiling in January, Yellen informed Congress that cash on hand and “extraordinary measures” should last at least until early June. But she warned the projection was subject to considerable uncertainty.
A variety of forecasters have estimated that the so-called X-date, when the US would default, would arrive over the summer or in the early fall.
The likelihood of an early June default grew in recent weeks when April tax receipts were coming in weaker than expected. A trio of analysts issued reports warning that the default date could hit soon.
However, a surge of tax revenue last week prompted two analysts to revise their forecasts to the second half of July.
If tax collections wind up being enough to keep Treasury’s coffers flush through early June, then it’s likely the government won’t default until much later in the summer. The agency will get another injection of funds from second quarter estimated tax payments, which are due June 15, and from an extraordinary measure that becomes available at the end of that month.
Biden told the congressional leaders – Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, House Minority Leader Hakeem Jeffries and McCarthy – that he wants to discuss the need to pass a clean bill to raise the debt ceiling.
The White House is maintaining its position that it will not negotiate over the debt ceiling.
The invitation comes after McCarthy noted earlier Monday that he had yet to hear from the president, nearly a week after the House passed its package to raise the debt ceiling by $1.5 trillion. However, the bill also includes spending cuts, beefed-up work requirements in safety net programs and other measures that Democrats would not accept.
Schumer sent a letter to colleagues on Monday voicing Senate Democrats’ opposition to the House package.
This story has been updated with additional information.