Yellen Warns US Could Default by June 1 If Debt Limit Not Raised

US Could Default on Financial Obligations by June 1

The United States is facing a financial crisis as it could default on its financial obligations as early as June 1. This is unless Congress takes action to raise the nation’s $31.4 trillion debt ceiling, according to Treasury Secretary Janet Yellen.

Yellen’s Warning to Congress

Yellen announced the news in a letter to House Speaker Kevin McCarthy (R-Calif.) on May 1. “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,” Yellen wrote.

Extraordinary Measures to Manage the Nation’s Bills

The secretary had warned Congress on Jan. 13 that a breach of the debt ceiling was days away but would be forestalled by taking “extraordinary measures” to manage the nation’s bills. At the time, Yellen estimated that those tactics would keep the Treasury under the limit through early June. The Congressional Budget Office later forecast an X Date sometime in late summer. Now, due to lower-than-expected tax receipts this spring, Yellen has restated the earlier forecast.

Republicans Passed the Limit, Save, Grow Act

This news comes days after Republicans passed the Limit, Save, Grow Act, a bill that would raise the debt limit by $1.5 trillion, enough to carry the government into early 2024. However, the increase was accompanied by a number of spending cuts and caps that Democrats have said are unacceptable.

Biden Refuses to Negotiate on Raising the Debt Ceiling

President Joe Biden has refused to negotiate on raising the debt ceiling, saying that to do so would put the “full faith and credit” of the United States at risk. “It’s up to you now,” McCarthy told reporters on April 26, as if addressing Biden. “Whether the economy gets in any trouble, it’s you. Because Republicans raised the debt limit. You have not. Neither has [Senate Majority Leader Chuck] Schumer.”

However, the following day, White House Press Secretary Karine Jean-Pierre, when asked whether the president was ready to negotiate, repeated Biden’s refusal to discuss the debt ceiling. “The United States has never failed on its debt obligation,” Jean-Pierre said at the press briefing on April 27.

Conclusion

The US is facing a financial crisis, and it’s up to Congress to take action to raise the debt ceiling before June 1. The situation is complicated by political differences between Republicans and Democrats, with the former passing a bill that the latter deems unacceptable. President Biden has refused to negotiate, citing the risk to the country’s credit. The world is watching as the US faces this critical moment in its financial history.

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