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US may default on debt as soon as June 1, Yellen reaffirms

<i>Alex Wong/Getty Images</i><br/>Treasury Secretary Janet Yellen
Getty Images
Alex Wong/Getty Images
Treasury Secretary Janet Yellen

By Tami Luhby, CNN

It’s still likely that the US could default on its obligations early next month — possibly as soon as June 1 — if Congress doesn’t act, Treasury Secretary Janet Yellen reiterated Monday.

The looming deadline is keeping the pressure high on House Republicans and the White House to bridge their differences and address the debt ceiling in the coming days. President Joe Biden is expected to meet again on Tuesday with House Speaker Kevin McCarthy and other top congressional leaders.

“With additional information now available, I am writing to note that we still estimate that Treasury will likely 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,” Yellen wrote to McCarthy.

Still, the actual date could be a number of days or weeks later, depending on how much revenue the federal government collects and how much it has to pay out in coming weeks, Yellen said. She will update Congress next week as more information becomes available.

Yellen’s missive comes two weeks after she first warned that the so-called X-date, when the US would default, could come as soon as June 1. That accelerated timetable sparked a meeting last week between Biden and the top four congressional leaders after months of talks being at a standstill.

Several forecasters had thought that Treasury would be able to continue paying the bills using cash and “extraordinary measures” until later in the summer. But weak tax collections this year pushed up the date.

Yellen once again urged Congress to act as soon as possible, noting that Treasury’s borrowing costs have increased substantially for securities maturing in early June.

“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” she wrote.

The Congressional Budget Office last week said there is a “significant risk” that the federal government will no longer be able to pay all its obligations in the first two weeks of June if the debt limit remains unchanged.

Talks ongoing

McCarthy voiced pessimism over the status of negotiations with the White House, saying Monday that there’s been no progress that he can see.

“We have no agreements on anything. That’s why I’m so concerned,” the Republican leader told reporters.

Meanwhile, Senate Majority Leader Chuck Schumer said talks are ongoing and very substantive issues are being discussed.

“The discussions on budget and appropriations are continuing as they should, revenues are on the table, spending cuts are on the table and they’re moving along,” Schumer, a Democrat, told CNN.

Negotiators have been able to pinpoint some areas on which congressional staff and the White House can find common ground, including revising the permitting process, rescinding unspent Covid-19 relief funds and potentially cutting spending, two sources told CNN Sunday.

Biden also expressed optimism on Sunday, saying, “I really think there’s a desire on their part, as well as ours, to reach an agreement.”

This story has been updated with additional information.

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CNN’s Nicky Robertson and Manu Raju contributed to this story.

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