Treasury Secretary Yellen Warns of Impending Debt Default

This revised estimate of Treasury Secretary Yellen comes just four days later than previously projected, intensifying the sense of urgency surrounding the need for lawmakers to raise the federal debt ceiling.

Treasury Secretary Yellen’s communication coincided with the start of the three-day Memorial Day weekend, heightening tensions over whether an agreement between the White House and Republicans in Congress could be reached in time, The Washington Post reported.

The critical “X-date” looms when the government’s financial cushion is depleted, and it can no longer fulfill all of its financial commitments, having exhausted the extraordinary measures employed since January to extend existing funds.

To reach this point, the Treasury employed a measure that hadn’t been used since 2015—a swap of approximately $2 billion in Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank.

Treasury Secretary Yellen emphasized the imperative of utilizing all available extraordinary measures to prevent the inability to meet the government’s commitments due to the extremely low level of remaining resources.

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Urgent Congressional Action Is Needed 

Lael Brainard, director of the National Economic Council, acknowledged the progress made in recent days towards a bipartisan budget agreement and stressed the urgent need for Congress to act swiftly to avert default.

Yellen noted that Treasury’s borrowing costs have already surged significantly for securities maturing in early June.

The projected X-date aligns with Treasury Secretary Yellen’s earlier estimations that the U.S. could deplete all extraordinary measures in early June, potentially as early as June 1.  However, this revised deadline allows lawmakers and the White House additional time to negotiate a deal.

Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, emphasized the need to promptly sign the deal into law, regardless of whether the X-date falls on June 1 or June 5.

MacGuineas warned that the uncertainty surrounding the X-date could potentially disrupt the markets, reinforcing the urgency of reaching a resolution without attempting to test the limits.

As the Memorial Day weekend unfolds, the pressure intensifies on lawmakers and the White House to bridge their differences and secure an agreement to raise the debt ceiling. Failure to do so would have dire consequences, impacting American families, jeopardizing the nation’s global standing, and raising concerns about national security interests.

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