US lawmakers have still failed to reach an agreement to raise or suspend the debt ceiling, which was reached on January 19, and now the country is at risk of defaulting.
US Treasury Secretary Janet Yellen has pushed back the deadline for depleting federal reserves and defaulting on the country’s debt by a few days, providing more time for lawmakers to reach an agreement on what to do about the debt ceiling.
In a letter to House Speaker Kevin McCarthy, Yellen reported that the new deadline is June 5, rather than June 1, as previously planned. According to Yellen, the Treasury will not have sufficient resources to meet the government’s obligations if Congress does not raise or suspend the debt limit by that date.
The United States reached its $31.4 trillion debt limit on January 19, and the Treasury Department has been taking extraordinary measures to continue paying the federal government’s bills. However, those measures are about to run out, and if an agreement is not reached to raise or suspend the debt ceiling, the US could default.
Yellen explained in the letter that during the first two days of June, scheduled payments of more than 130 billion dollars will be made, destined for veterans, social security, Medicare health program beneficiaries, and others. According to Yellen, this will leave the Treasury Department with extremely low resources.
Goldman Sachs economists Alec Phillips and Tim Krupa estimate that the US government could run out of funds completely by June 9. They consider the Treasury Department’s estimate of a possible default early next month to be very accurate. According to their analysis, the Treasury’s margin under the debt ceiling will barely exceed $30 billion by June 2 and will be completely depleted by June 9. However, they comment that there is a 10% chance that Congress will fail to act in time, while there is an 80% chance that lawmakers will reach a comprehensive deal and a 10% chance that some agreement will be reached in the near term.