Treasury Secretary Janet Yellen warned Monday that the U.S. could be unable to "continue to satisfy all of the government’s obligations" by June 1 if Congress does not raise or suspend the debt limit before that time.
Why it matters: The warning reduces the timeline in which the Biden administration and House Republicans must come to an agreement to stave off a catastrophic default.
- The two sides have been deadlocked for months, with House Republicans passing their own bill and President Biden refusing to negotiate until the debt ceiling is separated from spending talks.
- The Congressional Budget Office also warned Monday that the agency estimates that there "is a significantly greater risk that the Treasury will run out of funds in early June."
Between the lines: The timeline is further compressed by the fact that the House of Representatives is set to be in session for only 12 days while the Senate is in session for only 15 days in May.
- Biden is also expected to be out of the country in May for visits to Japan and Australia.
- The exact effects of the U.S. defaulting on its debt are not known, as it has never before occurred in U.S. history.
- However, Yellen and others have warned that a default could cause irreparable damage to the U.S. economy and global financial markets.
Driving the news: "After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” Yellen wrote in a letter to House Speaker Kevin McCarthy (R-Calif.).
- She added that the “actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates," noting that “it is impossible to predict with certainty the exact date when Treasury will be unable to pay the government’s bills."
- In response to Yellen's letter, McCarthy pushed blame for the stalemate in negotiations on Biden, saying the president "has refused to do his job."
- “After three months of the Biden administration's inaction, the House acted, and there is a bill sitting in the Senate as we speak that would put the risk of default to rest. The Senate and the president need to get to work — and soon," McCarthy's statement said.
The big picture: House Republicans passed legislation last month to raise the debt ceiling through 2024 and cut government spending, but it is all but certain to fail in the Democratic-controlled Senate.
- The White House has also threatened to veto the bill.
- Republicans and Democrats worked together to raise the borrowing limit three times throughout the Trump administration and several times in other previous administrations.
Go deeper: Congressional Democrats splinter on debt ceiling strategy
Editor's note: This story has been updated with additional details.
