US Treasury Secretary Janet Yellen listens during a signing ceremony for the Indonesia Infrastructure and Finance Compact, at the headquarters of the International Monetary Fund (IMF) in Washington, DC, on April 13, 2023.
Stephanie Reynolds | AFP | Getty Images
WASHINGTON — Treasury Secretary Janet Yellen on Monday warned that the United States could run out of steps to repay its debt obligations by June 1, earlier than the government and Wall Street had expected.
In a letter to House Speaker Kevin McCarthy, Yellen said the new data on tax receipts forced the department to increase its estimate of when the Treasury Department “will not continue to meet all of the government’s obligations” in potentially as early as June 1 , if Congress doesn’t raise or suspend the debt limit before then.
This date is earlier than expected by economists on Wall Street. Goldman Sachs’ latest estimate this week put the deadline at some point in late July, though the bank’s economists acknowledged that weaker-than-expected tax receipts could push that timeline forward.
On Monday, President Joe Biden called the “big four” congressional leaders — Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, McCarthy and House Democratic Leader Hakeem Jeffries — to invite them to a May 9 meeting at the White House to discuss the debt ceiling, a White House official told NBC.
Also the Congressional Budget Office revised its estimate for the so-called x-date on Monday.
“Because tax receipts through April are lower than the Congressional Budget Office expected in February, we now estimate that there is a greater risk that the Treasury will run out of funds in early June,” wrote CBO director Phill Swagel.
While there is technically a month between the date of the letter and the earliest x-date, congressional calendars on Monday showed there are only eight legislative days this month in which the House and Senate are in session.
This could significantly affect any effort to hammer out a last-minute deal in person on a debt-ceiling increase, one that could garner enough support to pass the Republican-controlled House and the Democratic-led Senate.
McCarthy was in Israel on Monday, where he delivered an address to the Knesset, the country’s parliament.
For the past two months, the White House has refused to participate in talks with McCarthy about the debt limit, insisting that House Republicans pass the debt limit increase with no strings attached. In exchange for voting to avoid a debt default, the House GOP caucus has demanded sweeping cuts in federal spending.
Yellen’s letter came less than a week after a Republican bill to raise the debt limit and cut government funding passed the House, but only after McCarthy made an eleventh-hour change to win over the GOP holdout.
Earlier in the day Monday, Schumer tore into the House GOP bill, accusing Republicans of “making it more likely to default by locking the House into an unacceptable and extreme position, and pulling us more.”
The estimate by Goldman Sachs noted that for now there are some ripples in the markets from the rising risk of a debt default. But this could change, analysts wrote, “once the Treasury announces a specific deadline for Congress to raise the debt limit.”
— CNBC’s John Melloy contributed to this story.