Treasury Secretary Janet L. Yellen said Wednesday that the U.S. will “almost certainly” not have enough cash to keep paying all its bills on time after early June, with a more accurate update coming soon. He said he would provide it to Congress. On when a nation could default if the debt ceiling is not raised.
The comments were made at a WSJ CEO Council event, where White House and House Republican negotiators raced to reach a deal Congress could pass by June 1 to raise the debt ceiling and cut government spending. It was served while The Secretary of the Treasury reiterated. He warned that a default would severely damage the U.S. economy and said he was left with no good options to contain the fallout.
“If Congress doesn’t move to raise the debt ceiling, and if that doesn’t happen and we have a so-called X-date, the Treasury Department and President Biden will face very tough choices,” Yellen said. “There will be some obligations that we cannot pay.”
Yellen declined to elaborate on what exactly she would do if the debt ceiling is not lifted, but a simple solution would be to “prioritize” certain government-mandated payments. rejected the idea that He pointed out that the government’s payment system was designed to pay bills on time, not to determine which bills to pay.
“Prioritization is not really operationally feasible,” Yellen said.
Yellen notified Congress this week that federal funds could run out as early as June 1. Her prospects have drawn skepticism from some House Republicans, who have asked Yellen to provide a detailed Treasury analysis. A cash reserve to prove that the deadline is genuine.
Yellen said Wednesday that there is considerable uncertainty related to tracking government payments and receipts, but that the next update will provide as much clarity as possible.
The Treasury secretary said he is already feeling the “starting points” of stress in financial markets from brinkmanship policies. But he said he has not spoken to investors about what would happen if the debt limit were not lifted.
“We are committed to eliminating delinquencies and raising the debt ceiling,” Yellen said. “We are not involved in planning in the event of default.”
Despite her concerns, Yellen said she hoped the negotiations would be successful and said the Biden administration was working on policies to reduce the deficit.
“I think a deal is possible,” Yellen said. “They are working towards an agreement that will have bipartisan support.”
