Yellen warns of missed payments if the debt limit is not lifted
Treasury Secretary Janet L. Yellen said Wednesday it was “almost certain” the United States would not have enough money to continue paying all its bills on time after early June and that she would give Congress a more precise update soon. about when the nation could default if the debt limit is not raised.
The comments, made at a WSJ CEO Council event, came as negotiators for the White House and House Republicans scrambled to reach a deal to raise the debt limit and cut government spending that Congress would pass before June 1. can approve. The Treasury Secretary reiterated her warning that a default would do serious damage to the US economy and argued that she would have no good options to contain the fallout.
“The Treasury and President Biden will face very difficult choices if Congress does not act to raise the debt ceiling and if we reach the so-called X-date without that happening,” Ms. Yellen said. “There will be some obligations that we can’t afford.”
Ms Yellen declined to elaborate on exactly how she would proceed if the debt limit is not lifted, but she dismissed the idea that “prioritizing” certain payments for the government to make would be an easy fix. She noted that government payment systems are designed to pay bills on time, not to decide which ones to pay.
“Prioritisation is not really something that is operationally feasible,” Ms Yellen said.
This week, Ms. Yellen informed Congress that the federal government could run out of money on June 1. Her projections have been met with skepticism by some House Republicans, who have called for her to provide an analysis detailing the details of the Treasury Department. cash reserves to prove that the deadline is realistic.
Ms Yellen said on Wednesday there was significant uncertainty about tracking government payments and receipts, but she planned to provide as much clarity as possible in her next update.
The finance minister said she already saw “the beginnings” of stress in financial markets due to the crisis. However, she said she has not been in contact with investors about what will happen if the debt limit is not lifted.
“We are determined not to miss payments and raise the debt ceiling,” Ms Yellen said. “We’re not involved in planning for what happens if there’s a default.”
Despite her concerns, Ms Yellen said she hoped the negotiations would be successful and that the Biden administration has committed to policies that would reduce deficits.
“I think a deal is possible,” Ms Yellen said. “They are working on an agreement that could force bipartisan support.”