US Treasury Secretary Janet Yellen speaks at a news conference on the 2023 IMF-World Bank Spring Meetings at the Treasury Department in Washington, DC, US, 11 April 2023. EFE-EPA FILE/JIM LO SCALZO

US could default on its debt by June 1, warns Yellen

Washington, May 1 (EFE).- US Treasury Secretary Janet Yellen warned Monday that the country could default on its debt by June 1 unless the Congress approved a suspension of the debt ceiling as soon as possible.

“After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” the secretary said in a letter to House Speaker Kevin McCarthy.

Yellen stressed that, given these projections, it was “imperative” that Congress act as soon as possible to ensure longer term certainty that the government will continue making the payments.

The treasury secretary sent an identical letter to House Minority Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer, and Senate Minority Leader Mitch McConnell, among others.

“We do not have the luxury of waiting until June 1 to come together, pass a clean bill to avoid a default and prevent catastrophic consequences for our economy and millions of American families,” Democrats Schumer and Jeffries said in a joint statement following Yellen’s remarks.

“It’s time to put aside partisan interests and do what is right and necessary for the American people to avoid a first-ever US government default that crashes the stock market, raises costs on families and jeopardizes retirement savings,” they added.

The current debt limit stands at $31.4 trillion, which the country hit on Jan. 19.

That same day the Treasury activated “extraordinary measures” to keep the country paying its bills, but stressed that these measures would extend only until June 5.

On Apr. 26, the Republican-controlled House of Representatives passed a bill to raise the debt ceiling in exchange for deep cuts in public spending.

But the proposal is unlikely to pass in the Democrat-controlled Senate  and the White House has warned that President Joe Biden will veto it if it does.

Yellen warned that past debt limit impasses have shown 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.”

After Yellen’s remarks, Biden invited McCarthy to a meeting at the White House on May 9.

The US has never defaulted on its debt but occasionally the possibility of doing so looms over it because, unlike other countries, its government can only incur debt up to the limit established by Congress, which has the power to raise that ceiling as it sees fit. EFE