Treasury Secretary Janet L. Yellen reiterated Monday that the United States may not be able to pay its bills by June 1, an announcement that continues to put pressure on the White House and congressional leaders as they negotiate raising the debt limit of the country.
The warning to Congress comes as President Biden and Chairman Kevin McCarthy will meet Monday afternoon at the White House to try to break the deadlock. Representatives for Mr. Biden and Mr. McCarthy have been in talks for the past week to come up with a plan that would limit federal spending and reduce the deficit, while raising the $31.4 trillion borrowing ceiling.
Ms Yellen warned that the country’s finances remain in a precarious state.
“With an additional week’s worth of information available, I write to note that we estimate that it is highly likely that the Treasury will no longer be able to meet all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and possibly as early as June 1,” Ms Yellen wrote.
In her previous letter, issued a week ago, Ms. Yellen made a caveat that her estimates could differ due to the unpredictability of incoming government tax revenues. She said the actual date when the Treasury Department will exhaust the so-called extraordinary measures it uses to defer a default could be “several days or weeks later”.
On Monday Ms Yellen did not suggest there might be more time and warned that not lifting the debt limit would be disastrous for the economy.
“The failure of Congress to raise the debt limit would cause severe hardship for American families, damage our global leadership position and raise questions about our ability to defend our national security interests,” Ms. Yellen said.
The country’s cash balance has fallen dangerously low. On Sunday, Ms Yellen dismissed hope that the so-called extraordinary measures she has used to postpone a default would be enough to allow normal government operations to continue beyond mid-June.
Republicans have refused to raise the debt limit without spending cuts, forcing Democrats to sit at the negotiating table to avoid a bankruptcy that could trigger a recession and financial crisis. The two sides remain far apart on key issues, including caps on federal spending, new job requirements for some recipients of federal poverty relief assistance, and funding designed to help the Internal Revenue Service crack down on tax evasion by high earners and corporations.
The finance minister said over the weekend that not raising the debt limit would force the government to make tough choices about how to meet the country’s financial obligations. Benefits to retirees and veterans are likely to be disrupted, and the uncertainty could cause interest rates to rise and stock prices to plummet.
The Biden administration has downplayed the idea that it could essentially ignore the debt limit and continue borrowing by invoking the 14th Amendment, which says the validity of the US debt will not be questioned. While the government’s lawyers have been studying the idea, officials believe the expected legal challenges and uncertainty will destabilize markets.
“There can be no acceptable outcomes if the debt ceiling is not raised,” Ms. Yellen said in “Meet the Press” on NBC.
