U.S. Treasury Secretary Janet Yellen and Ukraine Prime Minister Denys Shmyhal speak to the press after holding a bilateral meeting at the U.S. Treasury Department Building in Washington, D.C., U.S. April 13, 2023.Â
Ken Cedeno | Reuters
WASHINGTON — Treasury Secretary Janet Yellen reaffirmed to Congress on Monday that the United States could default on its debt as early as June 1.
“With additional information now available, I am writing to note that we still estimate that Treasury will likely no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” she wrote.
The guidance came as the White House and congressional leaders prepared to meet Tuesday to continue negotiations over potential spending cuts in exchange for House passage of a debt ceiling hike. The Democratic-majority Senate is expected to back whatever the White House negotiates with the GOP-controlled House.
In recent days, conflicting reports have emerged about whether negotiators are making progress.
President Joe Biden sounded optimistic this past weekend about reaching a deal with Republicans to raise or suspend the debt limit in time to avoid economic fallout from even a potential U.S. debt default.
“I really think there’s a desire on their part, as well as ours, to reach an agreement, and I think we’ll be able to do it,” Biden told reporters Sunday in Delaware. He added, “I remain optimistic because I’m a congenital optimist.”
But that optimism wasn’t matched on the other side of the table.
“I still think we’re far apart,” McCarthy told NBC News on Monday outside the Capitol. “It doesn’t seem to me yet that they want a deal.”
As she has in prior letters to Congress, the Treasury secretary underscored the urgency of the situation.
“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.
“In fact, we have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June,” she wrote.
The Tuesday meeting between Biden, House Speaker Kevin McCarthy, R-Calif., Minority Leader Hakeem Jeffries, D-N.Y., Senate Majority Leader Chuck Schumer, D-N.Y., and Minority Leader Mitch McConnell, R-Ky., was initially scheduled for Friday, but postponed until Tuesday to give aides more time to talk.
The new letter also came just days after guidance from the Congressional Budget Office that said tax revenues and emergency measures after June 15 “will probably allow the government to continue financing operations through at least the end of July.”
“If the debt limit remains unchanged, there is significant risk that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations,” said the CBO report.