US Treasury Secretary Janet Yellen listens during a signing ceremony for the Indonesia Infrastructure and Finance Compact, at the International Monetary Fund (IMF) headquarters in Washington, DC, on April 13, 2023.
Stefani Reynolds | AFP | Getty Images
WASHINGTON — Treasury Secretary Janet Yellen on Monday warned that the United States may run out of measures to pay its debt obligations by June 1, earlier than the government and Wall Street had been expecting.
In a letter to House Speaker Kevin McCarthy, Yellen said new data on tax receipts forced the department to move up its estimate of when the Treasury Department “will be unable to continue to satisfy all of the government’s obligations” to “early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time.”
This date is earlier than Wall Street economists were expecting. 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 move that timeline up further.
The Congressional Budget Office also revised its estimate for the so-called X-date on Monday.
“Because tax receipts through April have been less than the Congressional Budget Office anticipated in February, we now estimate that there is a significantly greater risk that the Treasury will run out of funds in early June,” wrote CBO director Phill Swagel.
The combination of Yellen’s letter and the new CBO estimate added a fresh sense of urgency to stalled negotiations between President Joe Biden and McCarthy’s Republican majority in the House.
McCarthy was in Israel on Monday, where he delivered an address to the Knesset, the nation’s parliament.
The White House has so far refused to participate in talks as long as McCarthy insists on linking a debt ceiling vote to Republican plans to make sweeping cuts to federal spending.
Yellen’s letter comes less than week after a Republican bill to raise the debt limit and slash government funding passed the House, but only after McCarthy made 11th hour changes in order to win over GOP holdouts.
The Goldman Sachs estimate noted that so far there have been few ripples in the markets from rising debt-related risk. 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.
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