Yellen says the US is ‘highly likely’ to be unable to pay its bills by early June

Janet Yellen has warned Congress that the US was “highly likely” to run out of money to pay all its bills as early as June 1, increasing pressure on the White House and Republican lawmakers to push for an unprecedented Get a deal done quickly to avoid default. Country’s debt

The Treasury Secretary issued the projection in a letter to Congress an hour before President Joe Biden was due to meet with Republican House Speaker Kevin McCarthy for a key negotiating session on how to ease a potential US fiscal crisis.

Yellen wrote, “It is highly likely that the Treasury will no longer be able to meet all of the government’s obligations if Congress does not act by early June to raise or suspend the debt ceiling, and potentially to the beginning of June 1”.

McCarthy has refused to raise the US$31.4tn borrowing limit, set by law, unless the White House and Democrats agree to spending cuts and new restrictions on qualifications for social safety net programs do not accept.

Biden agreed to negotiate a fiscal deal with McCarthy that could pave the way for raising the debt ceiling, but so far they have failed to reach an agreement.

No progress was made over the weekend while Biden was still in Japan for the G7 leaders’ summit. The White House accused Republicans of making “excessive” demands that remained unacceptable, and McCarthy blamed the White House for retreating from its position.

Biden spoke with McCarthy on the flight back to the US, and staff-level talks resumed between Sunday night and Monday morning. Speaking to reporters Monday afternoon before heading to the White House, McCarthy was more upbeat, even suggesting a deal was within reach earlier this week.

McCarthy told reporters, “We can get a deal tonight, we can get a deal tomorrow, but you have to do something this week to be able to pass it and move it to the Senate.”

While McCarthy is facing pressure from the right wing of his party not to make additional concessions to the White House, some Democrats are urging Biden not to cave to the Republicans. Several Democrats have called on the White House to invoke the 14th Amendment to the Constitution, stating that the “legality” of the US public debt will not be “questioned”, and that borrowing above the limit will continue.

Although Biden said on Sunday he believed he had the “right” to do so, he said it would not be a solution in the short term.

A week earlier, Yellen had made a similar projection on the date on which the US would risk default, although she described it at the time as only “likely” rather than “highly likely”, as she Did it on Monday. Still, private economists argue that the government has slightly more room to move than Yellen estimates. Oxford Economics forecast on Monday that the Treasury would be able to “squeak” until June 14.

However, it cautioned that there is “no room for error”, and estimates related to upcoming receivables, cash balances and other extraordinary measures were subject to change.

Meanwhile, economists at Goldman Sachs estimate that Treasury cash will be depleted by less than $30 billion by June 8 or 9. A note on Friday.