U.S. Treasury Secretary Janet Yellen has issued a warning that if Congress does not increase or suspend the debt ceiling by June 1, the Treasury would not be able to pay off all of the government’s obligations. Yellen also issued a warning that a US debt default “would produce an economic and financial catastrophe”.
In a letter to the House Speaker, Yellen stressed that it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments.
Yellen also announced that the Treasury is suspending the issuance of State and Local Government Series (SLGS) Treasury securities, which count against the debt limit, to manage the risks associated with the debt limit. However, this action will deprive state and local governments of an important tool to manage their finances.
Yellen has cautioned that delaying action until the very last minute may seriously undermine consumer and business confidence, raise the cost of short-term borrowing for taxpayers, and weaken the United States’ credit rating. She said that failing to extend the debt ceiling may put American people through enormous suffering, damage the nation’s standing as a global leader, and cast doubt on its capacity to protect national security interests. To prevent a disastrous default on the US government’s debt, Congress must act swiftly to raise or suspend the debt ceiling.
The Treasury Secretary’s letter provides an urgent reminder that political brinksmanship can have severe and long-lasting consequences for the US economy, and that elected officials have a responsibility to act in the best interests of their constituents and the nation as a whole.
U.S. Debt Default in June Estimated by Congressional Budget Office as well
The Congressional Budget Office (CBO) has revised its estimate of when the U.S. government might default on its debt obligations, aligning with the warning from Treasury Secretary Janet Yellen. According to the CBO’s latest announcement on Monday:
“Due to lower federal tax receipts than anticipated in February, we now estimate that there is a significantly greater risk of the Treasury running out of funds in early June.”
In response to this development, President Joe Biden has reached out to four congressional leaders, including House Speaker Kevin McCarthy, to discuss the debt limit in a meeting at the White House on May 9, as confirmed by a White House official to NBC.