U.S. Treasury Secretary Janet Yellen revealed on Friday that lawmakers have just over a week to reach an agreement on the debt ceiling before the federal agency runs out of funds and starts defaulting on its financial obligations.
The US Heads Towards Debt Default
The government will run out of money to pay its bills on June 5, triggering a dire default unless Congress raises the $31.4 trillion debt ceiling.
"Based on the most recent available data, we now estimate that the Treasury will not have sufficient resources to meet the government's obligations if Congress has not raised or suspended the debt limit by June 5," Yellen said in a letter to House Speaker Kevin McCarthy (R-Calif.).
Yellen explained that the federal government has several large payments outstanding, and that the Treasury has already used some of its last remaining "extraordinary measures" to raise funds to pay those bills. "Our projected resources would be insufficient to meet all of these obligations," he said.
"We have learned from previous debt limit impasses that waiting until the last minute to suspend or raise the debt limit can cause serious damage to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively affect the U.S. credit rating," Yellen continued. "In fact, we have already seen Treasury borrowing costs rise substantially for securities maturing in early June."
Yellen's announcement allows a little more time for Democratic Speaker Joe Biden and Republican House Speaker Kevin McCarthy to reach an agreement on raising the federal government's self-imposed borrowing limit. Earlier, the Treasury had said the deal should be reached as soon as June 1.
"If Congress does not raise the debt limit, it would cause severe hardship for American families, harm our global leadership position, and raise questions about our ability to defend our national security interests. I continue to urge Congress to protect America's full faith and credit by acting as soon as possible," Yellen said.