U.S. Treasury Secretary Janet Yellen has updated her projection regarding the date the U.S. government could default on its debt obligations. She warned that the Treasury “will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5.”
Yellen Warns US Could Default on June 5
U.S. Treasury Secretary Janet Yellen has revised her estimate for the potential date of a U.S. default. In a letter she sent to all congressional leaders Friday regarding the debt limit, Yellen wrote:
Based on the most recent available data, we now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5.
“We will make more than $130 billion of scheduled payments in the first two days of June, including payments to veterans and Social Security and Medicare recipients. These payments will leave Treasury with an extremely low level of resources,” Yellen clarified.
“During the week of June 5, Treasury is scheduled to make an estimated $92 billion of payments and transfers, including a regularly scheduled quarterly adjustment that would result in an investment in the Social Security and Medicare trust funds of roughly $36 billion. Therefore, our projected resources would be inadequate to satisfy all of these obligations,” the Treasury secretary added.
Yellen previously said that the Treasury will not be able to pay all of the government’s bills as early as June 1. The Congressional Budget Office (CBO) estimated that a U.S. default could occur in the first two weeks of June. Meanwhile, global investment bank Goldman Sachs said the “real deadline” for a U.S. default is more like June 8-9.
The U.S. government is expecting some tax payments on June 15. However, Yellen has stated that “the odds of reaching June 15, while being able to pay all of our bills, is quite low.”
Many people have warned of disastrous consequences of the U.S. defaulting on its debt obligations. Yellen said the consequences would be “unthinkable.” The International Monetary Fund (IMF) expects “very serious repercussions” if the U.S. defaults on its debt. Harvard Professor Kenneth Rogoff said it could spark a global financial crisis.
What are your thoughts on the revised timeline provided by U.S. Treasury Secretary Janet Yellen regarding the potential date of the U.S. government defaulting on its debt obligations? Let us know in the comments section below.
