Yellen Sounds Alarm on Possible June 1 Default If Biden, Congress Fail to Pass Debt Limit Bill

Tariffs - U.S. Treasury Secretary Janet Yellen speaks during a press conference at the G-2
AP Photo/Aijaz Rahi

Treasury Secretary Janet Yellen projected Monday that the U.S. could run out of cash to pay its bills as early as June 1.

Yellen made the estimation in a letter to House Speaker Kevin McCarthy (R-CA), writing that the nation would reach its debt ceiling by at least early June based on current data.

“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,” she wrote.

Yellen warned 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 cited past “impasses,” a reference to the current standoff between McCarthy and Democrat leaders President Joe Biden and Sen. Chuck Schumer (NY), as evidence that congressional action was needed to stave off an economic crisis.

McCarthy defied the expectations of some by successfully unifying House Republicans around a plan to address the debt ceiling last week. The chamber narrowly passed the Limit, Save, Grow Act along partisan lines after tense negotiations within the GOP conference.

The bill would raise the debt limit in exchange for substantial spending cuts that would save the government an estimated $4.8 trillion over ten years.

Speaker of the House Kevin McCarthy, R-Calif., conducts a news conference in the U.S. Capitols Statuary Hall on Thursday, January 12, 2023. (Tom Williams/CQ-Roll Call, Inc via Getty Images)

Speaker of the House Kevin McCarthy conducts a news conference in the U.S. Capitol, January 12, 2023. (Tom Williams/CQ-Roll Call, Inc via Getty Images)

Schumer, however, has declared the bill, which he calls the “Default on America Act,” dead on arrive in the Senate, despite offering no viable alternatives to solve the looming catastrophe.

Biden had up until Monday refused to negotiate with McCarthy on the debt ceiling. But, in a move that coincided with Yellen’s letter, the president gave in and reached out to McCarthy, Schumer, Senate Minority Leader Mitch McConnell (R-KY), and House Minority Leader Hakeem Jeffries (D-NY) to meet this month on the matter, the White House confirmed.

Drawing Biden to the negotiating table is a victory for McCarthy after the president had insisted he would not cooperate with House Republicans on the issue of the nation’s borrowing capacity.

Both Biden and Schumer have been demanding a “clean” debt limit hike, that is, a debt limit increase without the spending reductions Republicans are aiming for.

McCarthy has however promised to reject that option, pointing to exorbitant government spending and an inflationary environment under Biden as reason to attach conditions to any debt limit increase or suspension.

Yellen wrote to the GOP leader, “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.”

McCarthy responded to Yellen’s letter in a statement Monday evening, sharply criticizing the Biden administration for three months of “inaction.”

“After three months of the Biden administration’s inaction, the House acted, and there is a bill sitting in the Senate as we speak that would put the risk of default to rest,” McCarthy said. “The Senate and the President need to get to work — and soon.”

Write to Ashley Oliver at Follow her on Twitter at @asholiver.


Please let us know if you're having issues with commenting.