X marks the spot: Yellen tells Congress US might run out of cash to pay all its payments by June 5

May 26, 2023 | blog

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WASHINGTON (AP) — Treasury Secretary Janet Yellen informed Congress on Friday that the U.S. might default on its debt obligations by June 5 — 4 days later than beforehand estimated — if lawmakers don’t act in time to boost the federal debt ceiling.

Yellen’s letter comes as Congress breaks for the three-day Memorial Day weekend, and as tensions construct over whether or not a deal between the White House and Republicans in Congress can be struck in time.

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The so-called “X-date” arrives when the federal government not has sufficient of a monetary cushion to pay all of its payments, having exhausted the extraordinary measures it has been using since January to stretch present funds.

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Yellen stated in her letter that the company used one measure for the primary time since 2015 to get the U.S. monetary place thus far: a swap of roughly $2 billion in Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank.

“The extremely low level of remaining resources demands that I exhaust all available extraordinary measures to avoid being unable to meet all of the government’s commitments,” she stated in her letter.

Lael Brainard, director of the National Economic Council, stated “negotiators have made progress toward a reasonable, bipartisan budget agreement in recent days, and the Secretary’s letter underscores the urgent need for Congress to act swiftly to prevent default.”

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“We have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June,” Yellen stated.

“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,” she stated.

The newest projection is in keeping with her earlier estimates that the U.S. might exhaust all extraordinary measures in early June and as quickly as June 1, however the newest deadline affords lawmakers and the White House extra time to strike a deal.

Alec Phillips, chief political economist at Goldman Sachs Research, stated whereas the projected X-date is no surprise — because the funding financial institution projected that it could fall within the week of June 5 — the timing of the letter’s launch was shocking “given the state of negotiations.”

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“We were a little surprised that it came out today instead of waiting until after the weekend,” Phillips stated. “I think the legislative timeline dictated that they needed a deal by tomorrow, more or less, and this essentially adds four days to the timeline.”

“Hopefully that can get a deal this weekend,” Phillips stated.

Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, stated the brand new letter “shouldn’t mean anything other than we need to get this deal signed into law.”

“Whether it’s June 1 or June 5, we have waited far too long already,” she stated.

“This could rattle markets. The point about the X-date is that we don’t know when it is until we hit it and we should be trying to find out.”


Associated Press White House correspondent Zeke Miller contributed to this report.


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