The US debt ceiling must be raised or suspended by June, says the Treasury Department
In a letter to lawmakers, Treasury Secretary Janet L. Yellen said the agency may be “unable to continue satisfying all government obligations by early June, and potentially as early as June 1.” But she also cautioned that the estimate is imprecise, given the variability in federal tax revenue, which has come in lower than expected in recent months.
Still, Yellen emphasized with greater certainty that the economic consequences of inaction could be enormous: She said a default could cause “severe hardship for American families, damage our global leadership position and raise questions about our ability to defend our national security interests.”
“I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible,” Yellen said.
Since January, the Biden administration has taken a series of increasingly aggressive budget maneuvers to avoid breaching the debt ceiling, the statutory limit on how much the US government can borrow to pay its existing bills. Only Congress can raise or pause the legal cap, which is currently set at roughly $31 trillion.
Republicans repeatedly raised the debt ceiling under President Donald Trump without including fiscal reforms, but party lawmakers — who now control the House in an era of divided government — have refused to give the same support to Biden. Instead, House Speaker Kevin McCarthy (R-Calif.) has conditioned GOP support on their ability to achieve a long list of policy demands.
In a bill passed last week, Republicans spelled out their agenda: They seek billions of dollars in spending cuts, an end to federal funding to fight climate change and prosecute tax cheats, a set of new work requirements for welfare recipients and an end to Biden’s plan to erase student debt. McCarthy has presented the so-called Lift, Save, Grow Act as a rejection of Biden’s demand for an unconditional increase in the debt ceiling.
But the president has threatened to veto the measure, and Democrats who control the Senate have refused to take it up, arguing it could cause financial harm to American families. Biden and McCarthy still don’t even plan to meet for discussions, more than two months after their first conversation, increasing the chances of a fiscal disaster as early as this summer.
Speaking earlier Monday in the Rose Garden, Biden repeated his calls for lawmakers to raise the debt ceiling while blasting Republicans for what he characterized as “reckless hostage-taking.”
More than a decade ago, Republicans similarly engaged in such brinkmanship: their push to tie an increase in the debt ceiling to spending cuts spooked the stock market and triggered a downgrade in the nation’s credit rating, ultimately costing taxpayers an estimated $1 billion more. interest on government bonds.
This year, investors have already begun to hedge against the potential for another disruption, moving away from bonds maturing around the date of the debt ceiling deadline. In another ominous sign, debt rating agency Fitch Ratings warned that continued dysfunction could lead to another US credit downgrade.
Other estimates have suggested the US could reach the debt ceiling deadline – known in Washington as the “x date” – later than June. A Goldman Sachs report predicted that Congress likely has until July to act. An initial analysis by the nonpartisan Congressional Budget Office said it could fall as late as September, but the CBO said Monday that lower-than-expected tax revenues in April meant “there is a significantly greater risk that the Treasury will run out of funds in early June.” “