Yellen: Slim Chance of U.S. Paying Bills After Mid-June Without Debt Ceiling Deal.
Treasury Secretary Janet Yellen Warns of Possible Default in June
Treasury Secretary Janet Yellen has given her most specific prediction to date regarding the United States’ ability to pay its obligations without a debt ceiling deal. During a Sunday appearance on NBC News, Yellen stated that mid-June is the likely time period when the US can no longer pay all its obligations. Talks between the White House and Congress appear to have hit a snag, and Yellen’s warning comes as a reminder of the potential consequences of failing to raise the debt ceiling.
What are the Consequences of a Default?
If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests. Yellen notified Congress last week that she still believes a default could happen as early as June 1.
What are the Extraordinary Measures?
The Treasury Department has been enacting “extraordinary measures” since January, when the United States hit its statutory limit of roughly $31.4 trillion. Yellen explained that these measures involve taking some funds that are invested in non-marketable government security, such as the Civil Service Retirement Fund, and leaving it in cash to conserve room under the debt ceiling to issue a debt to the market.
What Happens Next?
Yellen declined to state an exact date for when a default could happen, instead stressing that her assessment has not changed since last week. June is still the earliest a default could happen, she emphasized. Yellen also refused to divulge what bills the United States might first choose not to pay over others when asked by Todd. She stated that there can be no acceptable outcomes if the debt ceiling isn’t raised, regardless of what decisions we make.
- What is the likelihood we can get to the June 15th tax receipts to avoid breaching the debt ceiling?
- Can you put a percentage on it?
- Is it 20%, 40%, something like that?
“There’s always uncertainty about tax receipts and spending,” Yellen replied. “And so it’s hard to be absolutely certain about this, but my assessment is that the odds of reaching June 15th, while being able to pay all of our bills, is quite low.”
Yellen noted that the Congressional Budget Office also warned of there being a risk that the government will not be able to pay all of its debts at some point during the first two weeks of June without a debt limit solution.
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