US could hit debt ceiling by June 1, warns Yellen


US Treasury Secretary Janet Yellen listens during a signing ceremony for the Indonesian Infrastructure and Finance Compact, at the headquarters of the International Monetary Fund (IMF) in Washington, DC on April 13, 2023.

Stefani Reynolds | AFP | Getty Images

WASHINGTON – Treasury Secretary Janet Yellen on Monday warned that the United States could run out of measures to pay its debts by June 1, earlier than expected by the government and Wall Street.

In a letter to House Speaker Kevin McCarthy, Yellen said new tax revenue data has forced the department to raise its estimate of when the Treasury Department “will be unable to continue to meet all of the government” to potentially as early as June 1. , if Congress does not raise or suspend the debt ceiling by then.

This date is earlier than Wall Street economists expected. Goldman Sachs’ latest estimate this week put the deadline at some point in late July, although the bank’s economists acknowledged that weaker-than-expected tax receipts could push that deadline forward.

On Monday, President Joe Biden called on the “big four” congressional leaders – Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, McCarthy and House Democratic Leader Hakeem Jeffries – for the invite to a May 9 meeting at the White House to discuss the debt limit, a White House official told NBC.

The Congressional Budget Office also revised his estimate for the so-called Monday x-date.

“Because tax revenues through April were lower than the Congressional Budget Office had forecast in February, we now believe there is a much greater risk that the Treasury will run out of funds in early June.” , he added. writing Phill Swagel, director of the CBO.

Although there is technically a month between the date of the letter and the first date x, congressional calendars showed on Monday that there are only eight legislative days this month when the House and Senate will be in session at the same time.

It could have a significant impact on any effort to strike a last-minute deal in person on a debt ceiling hike, a deal that could win enough support to pass the Republican-controlled House and the US-led Senate. the Democrats.

McCarthy was in Israel on Monday, where he delivered a speech to the Knesset, the country’s parliament.

For the past two months, the White House has refused to participate in debt ceiling talks with McCarthy, insisting that House Republicans pass a debt ceiling hike without any strings attached. In exchange for a vote to avoid a default, the House GOP caucus demanded sweeping federal spending cuts.

Yellen’s letter comes less than a week after a Republican bill to raise the debt ceiling and cut government funding passed the House, but only after McCarthy made changes to the eleventh hour in order to win over the holdouts in the GOP.

Earlier in the day on Monday, Schumer tore up the House GOP bill, accusing Republicans of having “made default more likely by locking the House in an unacceptable and very extreme position, and driving us away from even more”.

The Goldman Sachs estimate noted that so far there has been little impact on the markets due to the growing risk of default. But that could change, the analysts wrote, “once Treasury announces a specific timeline for Congress to raise the debt ceiling.”

— CNBC’s John Melloy contributed to this story.

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