(The Center Square) - U.S. Treasury Secretary Janet Yellen gave lawmakers a deadline Monday: raise the debt ceiling by June 1 or risk a default on U.S. debt obligations.
Yellen sent a letter to Congressional leaders Monday saying a default could come as early as June 1, though it could potentially be delayed a few weeks. A default would be unprecedented and have catastrophic consequences for the U.S. economy.
"After reviewing recent federal tax receipts, our best estimate is that 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," the letter said. "This estimate is based on currently available data, as federal receipts and outlays are inherently variable, and the actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates."
Yellen warned of the economic fallout of failing to raise the debt limit.
"We have learned from past debt limit impasses 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," the letter said. "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."
House Republicans recently passed a bill to cut spending by nearly $5 trillion and raise the debt limit by about $1.5 trillion, or until March 31, 2024, whichever comes first. With the bill's passage, House Speaker Kevin McCarthy showed he was able to wrangle lawmakers in his own party and put the ball in President Joe Biden's court.
After Yellen's warning, Biden reportedly reached out to Congressional lawmakers Monday to schedule a meeting.
"President Biden and the Democrats are putting our economy in jeopardy by risking a default," McCarthy said in a statement. "House Republicans are the only ones who have taken responsible action. The Limit, Save, Grow Act is the only plan that raises the debt ceiling, avoids a default, and saves taxpayer money."
The Republican bill would remove energy and environmental tax credits implemented in Biden's Inflation Reduction Act, implement permitting reforms to formally block Biden's student loan cancellation, and also would put work requirements in place for some federal social programs, such as requiring Medicaid recipients to work 80 hours per month.
President Joe Biden quickly blasted that legislation, saying the debt limit is too serious to pair with negotiations. His outreach Monday to lawmakers may be a walking back of that earlier stance.
"The President has been clear that he will not accept such attempts at hostage-taking," Biden's budget office said in a statement last week. "House Republicans must take default off the table and address the debt limit without demands and conditions, just as the Congress did three times during the prior Administration."