US Treasury Secretary Janet Yellen listens during a signing ceremony for the Indonesia Infrastructure and Finance Compact, on the International Monetary Fund (IMF) headquarters in Washington, DC, on April 13, 2023.
Stefani Reynolds | AFP | Getty Images
WASHINGTON — Treasury Secretary Janet Yellen on Monday warned that the US may run out of measures to pay its debt obligations by June 1, sooner than the federal government and Wall Street had been expecting.
In a letter to House Speaker Kevin McCarthy, Yellen said latest data on tax receipts forced the department to maneuver up its estimate of when the Treasury Department “shall be unable to proceed to satisfy all of the federal government’s obligations” to potentially as early as June 1, if Congress doesn’t raise or suspend the debt limit before then.
This date is sooner than Wall Street economists were expecting. Goldman Sachs’ latest estimate this week put the deadline in some unspecified time in the future in late July, though the bank’s economists acknowledged that weaker-than-expected tax receipts could move that timeline up further.
On Monday, President Joe Biden called the “big 4” congressional leaders – Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, McCarthy and House Democratic Leader Hakeem Jeffries – to ask all 4 men to a May 9 meeting on the White House to debate the debt limit, a White House official told NBC.
The Congressional Budget Office also revised its estimate for the so-called X-date on Monday.
“Because tax receipts through April have been lower than the Congressional Budget Office anticipated in February, we now estimate that there’s a significantly greater risk that the Treasury will run out of funds in early June,” wrote CBO director Phill Swagel.
While there’s technically a month between the date of the letter and the earliest X-date, congressional calendars showed Monday that there are only eight legislative days this month when each the House and Senate shall be in session at the identical time.
This might significantly impact any effort to hammer out a last-minute deal in person on a debt ceiling hike, one that might win enough support to pass within the Republican-controlled House and the Democratic-led Senate.
McCarthy was in Israel on Monday, where he delivered an address to the Knesset, the nation’s parliament.
For the past two months, the White House has refused to take part in talks with McCarthy on the debt limit, insisting that House Republicans pass a debt limit hike with none strings attached. The House GOP caucus has demanded sweeping cuts to federal spending in exchange for voting to avoid a debt default.
Yellen’s letter comes lower than week after a Republican bill to boost the debt limit and slash government funding passed the House, but only after McCarthy made eleventh hour changes in an effort to win over GOP holdouts.
Earlier within the day Monday, Schumer tore into the House GOP bill, accusing Republicans of getting “made default more likely by locking the House into an unacceptable and really extreme position, and pulling us even further apart.”
The Goldman Sachs estimate noted that to this point there have been few ripples within the markets from rising debt-related risk. But this might change, analysts wrote, “once the Treasury broadcasts a selected deadline for Congress to boost the debt limit.”
–CNBC’s John Melloy contributed to this story.
