Yellen: US to Run Out of Monday by 6/5 05/27 08:15
WASHINGTON (AP) -- Treasury Secretary Janet Yellen told Congress on Friday
that the U.S. could default on its debt obligations by June 5 -- four days
later than previously estimated -- if lawmakers do not act in time to raise the
federal debt ceiling.
Yellen's letter comes as Congress breaks for the three-day Memorial Day
weekend, and as tensions build over whether a deal between the White House and
Republicans in Congress will be struck in time.
The so-called "X-date" arrives when the government no longer has enough of a
financial cushion to pay all of its bills, having exhausted the extraordinary
measures it has been employing since January to stretch existing funds.
Yellen said in her letter that the agency used one measure for the first
time since 2015 to get the U.S. financial position to this point: 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 said in her letter.
Lael Brainard, director of the National Economic Council, said "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."
"We have already seen Treasury's borrowing costs increase substantially for
securities maturing in early June," Yellen said.
"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
The latest projection is in line with her previous estimates that the U.S.
could exhaust all extraordinary measures in early June and as soon as June 1,
but the latest deadline affords lawmakers and the White House more time to
strike a deal.
Alec Phillips, chief political economist at Goldman Sachs Research, said
while the projected X-date is not surprising -- as the investment bank
projected that it would fall in the week of June 5 -- the timing of the
letter's release was surprising "given the state of negotiations."
"We were a little surprised that it came out today instead of waiting until
after the weekend," Phillips said. "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 said.
Maya MacGuineas, president of the bipartisan Committee for a Responsible
Federal Budget, said the 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
"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 shouldn't be trying to find out."