Yellen Tells McCarthy Treasury Will Run Out of Money by June 5

May 26, 2023 by Dan McCue
Yellen Tells McCarthy Treasury Will Run Out of Money by June 5
Federal Reserve Chair Janet Yellen speaks during a news conference following the Federal Open Market Committee meeting in Washington. (AP Photo/Carolyn Kaster, File)

WASHINGTON — The deadline has now been set. Treasury Secretary Janet Yellen informed House Speaker Kevin McCarthy, R-Calif., on Friday that lawmakers have until June 5 to raise or suspend the debt limit or risk seeing the nation default on its debt.

In a letter delivered to McCarthy Friday afternoon, Yellen said the June 5 deadline is based on the most recent available data and that the government will make $130 billion in scheduled payments on June 1 and 2.

These will include payments to veterans, as well as Social Security and Medicare recipients.

But she warned “these payments will leave Treasury with an extremely low level of resources,” and the department will likely not have the resources to make its regularly scheduled quarterly adjustment, which would invest roughly $36 billion in the Social Security and Medicare trust funds.”

“Yesterday we used an additional extraordinary measure that Treasury has employed in a number of past debt limit episodes: a swap of approximately $2 billion of Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank,” Yellen said.

“While this measure has not been used since 2015 due to its limited size, the extremely low level of remaining resources demands that I exhaust all available extraordinary measures to avoid being unable to meet all of the government’s commitments,” she said.

Yellen reminded McCarthy that past debt limit impasses illustrated 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.”

“In fact, we have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June,” she 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,” Yellen continued.

“I continue to urge Congress to protect the full faith and credit of the United States by acting as soon as possible,” she said in closing.

Dan can be reached at [email protected] and @DanMcCue

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