Treasury confirms U.S. default as early as June 1 without debt ceiling hike

The U.S. Treasury Department reiterated Monday it expects to be able to pay the U.S. government’s bills only through June 1 without a debt limit increase, leaving just 10 days for White House negotiators and congressional Republicans to reach a deal.

In her third letter to Congress in three weeks, Treasury Secretary Janet Yellen said it was “highly likely” that the agency will be unlikely to meet all U.S. government payment obligations by early June, and as early as June 1, without congressional action to raise the $31.4 trillion debt ceiling, which would trigger the first-ever U.S. default.

“With an additional week of information now available, I am writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” she said.

Yellen said the estimates, in line with her last letter to Congress on May 15, were based on currently available data, but federal receipts, outlays and debt could still vary. She said she would update Congress as more information became available.

U.S. President Joe Biden, who cut short his trip to Asia to negotiate a debt ceiling deal, will meet with Republican speaker of the House Kevin McCarthy at 5:30 p.m., after their aides met for more than two hours on Monday.

McCarthy told reporters that the talks were “on the right path” ahead of the meeting.

Yellen has repeatedly warned that failure by Congress to raise the federal borrowing limit would unleash an “economic and financial catastrophe” for the U.S. and global economies.

She said Treaury’s borrowing costs had already increased, and urged Congress to act as soon as possible to avert the negative consequences that could come even before a default.

“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,” she wrote.

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