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Debt-Limit deal passes House with broad bipartisan support
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efficentupup joined discussion · May 24, 2023 05:32

Yellen warns Congress again that default could be just days away, but others forecast a little more time

Treasury Secretary Janet Yellen reinforced her warning to Congress that it has only a 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 Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” she wrote.
Yellen warns Congress again that default could be just days away, but others forecast a little more time
Yellen’s latest missive to Congress comes as White House and House GOP negotiators continue trying to hammer out 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 is agreed to,” though there have been some good discussions. Among the sticking points is the depth of spending cuts.
Yellen warns Congress again that default could be just days away, but others forecast a little more time
Yellen has spent much of May laying out the seriousness of a potential default, which would be a first for the US. She has said it could unleash a global economic recession and financial upheaval, as well as hurt millions of Americans who rely on federal government payments, including Social Security recipients, federal workers and Medicare providers.
A little more time?
Yellen warns Congress again that default could be just days away, but others forecast a little more time
Several other analyses back up Yellen’s forecast that the X-date could arrive in early June, though they don’t necessarily think it’s as early as June 1.
“Our projections show Treasury able to get to June 14 before exhausting its cash, but there is no room for error and this date can change,” Nancy Vanden Houten, lead US economist for Oxford Economics, wrote in a report Monday.
Meanwhile, $Goldman Sachs (GS.US)$ on Friday said the agency faces “clear risk of missing payments” on June 8 or June 9. $Wells Fargo & Co (WFC.US)$ analysts said they are a bit more optimistic than Yellen that Treasury could get to June 15. The secretary has said that the odds are “quite low.”
If Treasury can continue paying the bills into the middle of next month, then it’s likely the government won’t default until later in the summer. The agency will get another injection of funds from second quarter estimated tax payments, which are due June 15, and from $145 billion in an “extraordinary measure” that becomes available at the end of that month.
Treasury's cash on hand has decreased from $238.5 billion at the start of the month to $60.7 billion as of Friday. This is due to fluctuations in revenue and payments. Since hitting its borrowing cap in January, Treasury has been relying on cash and extraordinary measures to pay bills until Congress addresses the debt ceiling. As of Wednesday, the agency had about $92 billion in remaining extraordinary measures, down from around $220 billion in January.
What happens if the U.S. runs out of money?
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efficentupup
True and timely
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