US Treasury Secretary warns about debt limit

US Treasury Secretary Janet Yellen reiterated her warning that the US could face a cash crunch by June 1 if the debt limit impasse is not resolved. US Treasury Secretary Janet Yellen stated that the country could face a cash crunch if the debt limit is not increased or suspended by June 1. Yellen penned a new letter to US House Speaker Kevin McCarthy to share updated information on the debt limit. In the letter, Yellen stated that it is estimated that the Treasury may not be able to meet all of the government’s obligations if Congress does not raise or suspend the debt limit by early June and potentially by June 1. Pointing out that these estimates are based on currently available data, Yellen noted that federal revenues, spending and debts may differ from these estimates. “It may negatively affect the US credit rating” Noting that the actual date that the Treasury exhausts its extraordinary measures could be a few days or weeks later than these estimates, Yellen stated that she will provide additional information to Congress next week as more information becomes available. “We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can seriously harm business and consumer confidence, increase short-term borrowing costs for taxpayers, and negatively impact the U.S. credit rating,” Yellen said. Noting that we have already seen significant increases in the Treasury’s borrowing costs for securities maturing in early June, Yellen said that if Congress fails to increase the debt limit, it will cause serious hardship for American families, damage the country’s global leadership, and raise questions about its ability to defend its national security interests. Yellen reiterated her call on Congress to protect the U.S.’s reputation by taking action as soon as possible. Federal government reaches current debt limit The federal government in the U.S. has reached a debt limit of $31.4 trillion, which could lead to a default. The debt limit, or debt ceiling, is “an upper limit on the amount of money the U.S. government can borrow to repay its debts.” House Republicans, who hold the majority in the House of Representatives, have favored significant spending cuts in debt limit negotiations. Democrats, on the other hand, have insisted on raising the debt limit and have rejected Republican proposals to cut certain spending. President Joe Biden is expected to meet with congressional leaders on Tuesday to discuss the debt limit.