Yellen Sounds Alarm on Default in New Warning to McCarthy on Debt Ceiling Deadlock

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Treasury Secretary Janet Yellen has issued a renewed—and alarmist—warning to House Speaker Kevin McCarthy (R-Calif.) and other congressional leaders, reiterating her earlier position that the country could run out of money to pay its debt obligations as early as June 1, but this time around expressing more confidence in her dire prediction.

Yellen has repeatedly warned that the debt ceiling deadlock grinding on in Washington is pushing the country closer to the so-called X-date, when the Treasury Department’s bag of accounting tricks (known as “extraordinary measures”) runs out and the government faces the prospect of a debt default.

In her first letter to McCarthy on May 1 (pdf), Yellen said it was the Treasury Department’s “best estimate” that it would be unable to continue to satisfy all of the government’s debt obligations by early June and potentially as early as June 1. She reiterated that view in a May 15 letter, in which she noted it’s impossible to predict the exact timing of the X-date.

But in a new letter (pdf) to McCarthy and congressional leaders on Monday, Yellen’s rhetoric took a more alarmist tone, saying that incoming data show it’s now “highly likely” that the government will run out of money as early as June 1.

“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,” Yellen wrote.

Yellen’s increased confidence in her X-date estimate stands in some contrast to a projection from Goldman Sachs, which expects the country to have a bit more runway—until June 8—before it runs out of money. Still, the investment bank warned that “waiting for the last minute isn’t necessarily the right move, even though we think that maybe they could go a little longer.”

By Tom Ozimek

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