Yellen maintained that while the exact so-called X-date remains unknown, she believes it “highly likely” that the nation will run out of cash to pay its debt obligations by the beginning of June and June 1 at the earliest.
“These estimates are based on currently available data, and federal receipts, outlays, and debt could vary from these estimates,” Yellen wrote. “I will continue to update Congress as more information becomes available.”
The letter comes after Yellen wrote to McCarthy on May 15 with a similar estimate, and as McCarthy and President Joe Biden continue to engage in tense negotiations on raising the debt limit while also passing House Republicans’ desired spending reductions.
Yellen released her latest letter amid McCarthy and Biden meeting for more eleventh-hour talks on Monday after Biden refused for months to entertain the debt ceiling plan that Republicans ultimately passed out of the House in April via the Limit, Save, Grow Act.
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Signaling he and the president may have found common ground after the meeting, McCarthy said, “I thought it was more productive than the other meetings we’ve had, but we still have differences.”
Both Biden and Senate Majority Leader Chuck Schumer (D-NY) had been demanding a “clean” debt limit hike, that is, a debt limit increase without the spending reductions Republicans are aiming for.
McCarthy and Republicans, who hold a narrow House majority, deem that a non-option, pointing to exorbitant government spending and an inflationary environment under Biden as reason to attach conditions to any debt limit increase.
McCarthy said after Monday’s meeting that Biden told him “for 97 days they wouldn’t meet with us. That’s really why we’re where we are today. The House Republicans, they took action. The Senate never did anything.”
McCarthy said he conveyed to Biden that Republicans would, among their hardline conditions for a debt ceiling increase, not vote to raise taxes and would seek certain other means to save on spending, such as work requirements for welfare recipients, annual spending caps, and permitting reform.
House Financial Services Committee chairman Rep. Patrick McHenry (R-NC) also spoke to the press after Monday’s meeting, blasting Biden and his surrogate negotiators for a “lack of urgency” in the face of the looming default.
“What I sense from the White House is a lack of urgency,” McHenry said. “I think to play brinksmanship is not wise when it comes to where we are with the banking system, with the economy.”
Yellen raised more alarm in her letter, warning that a stalemate between Biden and Republicans lasting into June could 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,” Yellen 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.”
Under pressure to find a resolution before lawmakers are set to break for the Memorial Day holiday and recess, McCarthy said Monday evening that staff from the White House and Congress would continue to work towards a deal through Monday night.