Yellen: U.S. May Default by June 1 Without Debt Limit Increase.

The United States at Risk of Defaulting on Financial Obligations

The United States is at risk of defaulting on its financial obligations as early as June 1, according to Treasury Secretary Janet Yellen. In a letter to House Speaker Kevin McCarthy, Yellen stated that if Congress does not take action to raise the nation’s $31.4 trillion debt ceiling, the government will be unable to satisfy all of its obligations by early June.

Warnings of Breach of Debt Ceiling

Yellen had previously warned Congress on Jan. 13 that a breach of the debt ceiling was days away but could 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. However, due to lower-than-expected tax receipts this spring, Yellen has restated the earlier forecast.

Republicans Pass Limit, Save, Grow Act

Days before Yellen’s announcement, 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.

President Biden Refuses to Negotiate

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. McCarthy has repeatedly said that Republicans will not allow the country to default on its financial obligations, but raising the debt limit should be accompanied by serious discussions about curbing federal deficit spending.

Treasury to Stop Issuing SLGS Treasury Securities

Yellen also said that the Treasury would stop issuing State and Local Government Series (SLGS) Treasury securities. “Treasury will take this action to manage the risks associated with the debt limit, but it is not without costs, as it will deprive state and local governments of an important tool to manage their finances,” she wrote.

Severe Hardship to American Families

If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm the country’s global leadership position, and raise questions about its ability to defend national security interests, according to Yellen. She respectfully urged Congress to protect the full faith and credit of the United States by acting as soon as possible.

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