Yellen warns that the US could default as early as June 1st

Yellen warns that the US could default as early as | ltc-a

Treasury Secretary Janet L. Yellen reiterated on Monday that the United States may not be able to pay its bills as early as June 1, an announcement that keeps the pressure on the White House and congressional leaders as they negotiate how to raise the cap. of the nation’s debt.

THE warning to Congress comes as President Biden and President Kevin McCarthy are due to meet at the White House Monday afternoon to try to resolve the impasse. Representatives for Biden and McCarthy were engaged in talks last week to devise a plan that would cap federal spending and reduce the deficit, while raising the maximum loan limit by $31.4 trillion.

Ms Yellen warned that the nation’s finances remain in a precarious state.

« With an additional week of information now available, I write to note that we estimate it is very likely that the Treasury will no longer be able to meet all government obligations unless Congress has acted to raise or suspend the debt limit by early June and potentially as early as June 1,” Ms Yellen wrote.

The nation’s cash balance has become dangerously low. On Sunday, Ms Yellen dismissed hopes that the so-called extraordinary measures she used to delay a default would be enough to maintain normal government operations beyond mid-June.

Republicans have refused to raise the debt limit without spending cuts, forcing Democrats to the negotiating table to avoid a default that could cause a recession and financial crisis. The two sides remain apart on key issues, including federal spending limits, new work requirements for some recipients of federal poverty relief, and funding to help the Internal Revenue Service crack down on petty tax evasion. of high incomes and companies.

The Treasury secretary said over the weekend that failure to raise the debt limit would force the government to face difficult choices about how to meet the nation’s financial obligations. Benefit payments to retirees and veterans are likely to be halted, and the uncertainty could cause interest rates to rise and stock prices to plummet.

The Biden administration has downplayed the idea that it can essentially ignore the debt limit and continue to borrow by invoking the 14th amendment, which states that the validity of US debt must not be questioned. Though administration lawyers have studied the idea, officials believe the expected legal challenges and uncertainty would destabilize markets.

« There can be no acceptable outcomes if the debt ceiling isn’t raised, » Ms. Yellen said on NBC’s « Meet the Press. »