Yellen warns Congress again that default may be just days away, but others predict a little more time
(CNN) Treasury Secretary Janet Yellen reinforced her warning to Congress that there is little time left to address the debt ceiling before the nation defaults on its obligations.
It is “highly likely” that the agency will not be able to pay all of its bills in full and on time as soon as June 1, Yellen wrote in a letter to House Speaker Kevin McCarthy on Monday.
“With an additional week of information now available, I am writing to note that we estimate that it is highly likely that the Treasury Department will no longer be able to satisfy all of the government̵[ads1]7;s obligations if Congress has not acted to raise or suspend the debt limit by early in June, and potentially as early as June 1,” she wrote.
Yellen’s latest message to Congress comes as White House and House GOP negotiators continue to try to strike a deal before the so-called X date, when the nation would default.
McCarthy, who is scheduled to meet with President Joe Biden on Monday, said “nothing has been agreed,” although there have been some good discussions. Among the sticking points is the depth of the spending cuts.
The speaker said the package must come together this week for the House to pass it and move it to the Senate.
Yellen has spent much of May explaining the seriousness of a potential default, which would be the first for the US. She has said it could trigger a global economic recession and financial upheaval, as well as harm millions of Americans who depend on federal government payments, including Social Security recipients, federal workers and Medicare providers.
A little more time?
Several other analyzes support Yellen’s forecast that the X date could come in early June, although they do not necessarily think it is as early as June 1.
“Our forecasts show that the Treasury is able to get to June 14 before using up the cash, but there is no room for error and this date is subject to change,” Nancy Vanden Houten, chief US economist for Oxford Economics, wrote in a report Monday.
Meanwhile, Goldman Sachs said on Friday that the agency faces “clear risks of missing payments” on June 8 or 9.
Wells Fargo analysts said they are slightly more optimistic than Yellen that the Treasury could make it to June 15. The secretary has said the odds are “pretty low.”
But they added that their confidence has been shaken by previous forecast errors that underestimated the need for funding and the size of the budget deficit. They noted that even in the best case scenario, the Treasury will not have much funds on hand in the first half of next month.
“Put another way, a fifty-fifty chance of a default in early June in the absence of a debt ceiling increase remains very concerning and highlights the clear risk of hitting the X date in early June,” they wrote in a note.
If the Treasury can continue to pay its bills by the middle of next month, it is likely that the government will not default until later this summer. The agency will get another infusion of funds from estimated second-quarter tax payments, which are due June 15, and from $145 billion in an “extraordinary measure” that will become available at the end of that month.
The Treasury had $60.7 billion in cash on hand as of Friday, according to federal data. The amount bounces around as the agency takes in revenue and makes payments, but the balance has fallen from $238.5 billion at the beginning of the month, when coffers were relatively flush from April’s tax collection.
Ever since the US reached the debt ceiling in January, the Treasury Department has been forced to rely on cash and extraordinary measures to pay the bills until Congress tackles the debt ceiling. The agency had about $92 billion left in extraordinary measures as of Wednesday, down from about $220 billion at the end of January.
This headline and story have been updated with additional information.