US Treasury Secretary Janet Yellen warned on Monday that the federal government could run short of cash to pay its bills as soon as next month without a debt limit increase.
“After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” Yellen wrote in a letter to House and Senate leaders.
She urged congressional leaders “to protect the full faith and credit of the United States by acting as soon as possible.”
“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” Yellen wrote.
“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 cautioned.
The Congressional Budget Office (CBO) also updated its forecast on Monday, warning there was a “significantly greater risk that the Treasury will run out of funds in early June” because of weaker-than-expected tax collections. The CBO had originally projected that a default could happen between July and September.
The warnings come after a months-long standstill in talks on the matter between the White House and Republicans in Congress.
Yellen has been voicing alarm since January, when the United States hit its $31.4 trillion debt ceiling. At the time she notified Congress that the Treasury had begun resorting to “extraordinary measures” to avoid a federal government default.
On Monday, President Joe Biden called all four congressional leaders and invited them to a May 9 meeting on the issue.
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