US Treasury Secretary Janet Yellen listens during a signing ceremony for the Indonesia Infrastructure and Finance Compact, at the International Monetary Fund (IMF) headquarters in Washington, DC, on April 13, 2023.
Stefani Reynolds | AFP | Getty Images
WASHINGTON — Treasury Secretary Janet Yellen on Monday warned that the United States may run out of measures to pay its debt obligations by June 1, earlier than the government and Wall Street had been expecting.
In a letter to House Speaker Kevin McCarthy, Yellen said new data on tax receipts forced the department to move up its estimate of when the Treasury Department “will be unable to continue to satisfy all of the government’s obligations” to potentially as early as June 1, if Congress doesn’t raise or suspend the debt limit before then.
This date is earlier than Wall Street economists were expecting. Goldman Sachs’ latest estimate this week put the deadline at some point in late July, though the bank’s economists acknowledged that weaker-than-expected tax receipts could advance that timeline.
On Monday, President Joe Biden called the “big four” congressional leaders — Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, McCarthy and House Democratic Leader Hakeem Jeffries — to invite them 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 its estimate for the so-called x-date on Monday.
“Because tax receipts through April have been less than the Congressional Budget Office anticipated in February, we now estimate that there is a significantly greater risk that the Treasury will run out of funds in early June,” wrote CBO director Phill Swagel.
While there is technically a month between the date of the letter and the earliest x-date, congressional calendars showed Monday that there are only eight legislative days this month when both the House and Senate will be in session at the same time.
This could significantly impact any effort to hammer out a last-minute deal in person on a debt-ceiling hike, one that could win enough support to pass in the Republican-controlled House and the Democratic-led Senate.
McCarthy was in Israel on Monday, where he delivered an address to the Knesset, the nation’s parliament.
For the past two months, the White House has refused to participate in talks with McCarthy on the debt limit, insisting that House Republicans pass a debt-limit hike without any strings attached. In exchange for voting to avoid a debt default, the House GOP caucus has demanded sweeping cuts to federal spending.
Yellen’s letter comes less than week after a Republican bill to raise the debt limit and slash government funding passed the House, but only after McCarthy made eleventh hour changes in order to win over GOP holdouts.
Earlier in the day Monday, Schumer tore into the House GOP bill, accusing Republicans of having “made default more likely by locking the House into an unacceptable and very extreme position, and pulling us even further apart.”
The Goldman Sachs estimate noted that so far there have been few ripples in the markets from the rising risk of a debt default. But this could change, analysts wrote, “once the Treasury announces a specific deadline for Congress to raise the debt limit.”
— CNBC’s John Melloy contributed to this story.