Treasury Secretary Janet L. Yellen said Wednesday that it is “almost certain” that the U.S. will not enough cash Continue to pay all bills on time after early June, and she will soon provide Congress with a more accurate update on when the country may default if the debt ceiling is not raised.
The comments at the Wall Street Journal CEO Council event come as negotiators from the White House and House Republicans have been racing to seal a deal that would raise the debt ceiling and reduce government spending that Congress can pass by June 1. The Treasury secretary reiterated her warning that a default would do severe damage to the U.S. economy and suggested she would have few good options to curb the fallout.
“If Congress doesn’t act to raise the debt ceiling, and if we hit a so-called X-date without that happening, the Treasury Department and President Biden will have a very tough choice,” Ms Yellen said. “There will be obligations that we won’t be able to pay.”
Ms Yellen declined to elaborate on how she would proceed if the debt ceiling was not lifted, but she dismissed the idea that “prioritizing” certain payments from the government would be an easy fix. She pointed out that the government payment system is designed to pay bills when they are due, not decide which bills to pay.
“Prioritization is not operationally viable,” Ms Yellen said.
This week, Ms Yellen informed Congress that the federal government could run out of cash as soon as June 1. Some House Republicans are skeptical of her forecast, and they have been calling for her analysis detailing the Treasury Department’s cash position. The cash reserve proves that the deadline is true.
Ms Yellen said on Wednesday that there are considerable uncertainty Relevant to tracking government spending, but she plans to provide as much clarity as possible in her next update.
The finance minister said she had seen the “start” of stress in financial markets due to brinkmanship. However, she said she hadn’t discussed with investors what would happen if the debt ceiling wasn’t lifted.
“We are committed to not missing payments and raising the debt ceiling,” Ms Yellen said. “We are not involved in planning what will happen if there is a breach.”
Despite the concerns, Ms Yellen said she hoped the talks would succeed and that the Biden administration has been committed to policies to reduce the deficit.
“I think a deal is possible,” Ms Yellen said. “They’re trying to get a deal that can command bipartisan support.”