Treasury Secretary Janet Yellen has sent a letter to Congress warning that the Treasury is running out of ways to stall as the U.S. debt limit approaches.
The latest problem is that the IRS brought in less tax revenue this year than it had anticipated."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," Yellen wrote.
Because federal costs are "variable," Yellen wrote the Treasury may have enough reserves to keep up payments for a few weeks more than the worst case scenario.
The treasury has already taken a set of "extraordinary measures" to buy time, including pausing investment in retirement funds for postal workers and other federal employees; and pausing U.S. dollar investment in the Exchange Stabilization Fund, which the government uses to buy and sell foreign currencies.
Should you be worrying about the US debt limit right now?
Concern over a possible default is expected to intensify in the coming weeks as Congress debates raising the U.S. debt ceiling.
Monday, Yellen said the Treasury is also pausing certain securities that it issues to states and cities. This gives the federal government more headroom for the debt limit — but Yellen wrote that state and municipal governments may run into financial problems down the road because of it.
Yellen told Congress it needs to act as quickly as possible not just to protect the consumer economy, but also to make sure the U.S. doesn't risk default or a major recession.
"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," she wrote.
On Monday Scripps News confirmed President Biden has asked Congressional leaders to meet for new discussions about the debt ceiling.
NEW: @scrippsnews confirms that President Biden is calling all four key congressional leaders regarding a meeting to discuss the debt ceiling, according to a senior Republican leadership aide.
— Nathaniel Reed (@ReedReports) May 1, 2023
