Janet Yellen says US may run short of cash after June 1 without debt limit hike

The U.S. Treasury Department said Monday it now expects to be able to pay all U.S. government obligations only through June 1 without a federal debt limit increase, adding urgency to a bitter fiscal fight between congressional Republicans and Democrats and the White House.

U.S. Treasury Secretary Janet Yellen said in a letter to Congress that the agency will be unlikely to meet all U.S. government payment obligations by “early June.” The debt ceiling could become binding by June 1, she said.

After hitting the $31.4 trillion borrowing cap on Jan. 19, Treasury Secretary Janet Yellen previously told Congress Treasury would keep up payments on debt, federal benefits and make other outlays at least through June 5 using cash receipts and extraordinary cash management measures.

The new date reflects a more specific estimate, based on taxes collected during the April 2023 income tax filing season.

Earlier on Monday, U.S. President Joe Biden summoned the four top congressional leaders to the White House next week after the Treasury warned the government could run short of cash to pay its bills by June.

The estimate raised the risk that the United States is headed for an unprecedented default that would shake the global economy, adding new urgency to political calculations in Washington, where Democrats and Republicans were girding for a months-long standoff.

Biden called Republican House Speaker Kevin McCarthy in Jerusalem, where he is on a diplomatic trip, to invite him to a May 9 White House meeting. The two leaders haven’t sat down to discuss the issue since February.

The new potential “X-date,” which takes in to account April tax payments, is largely unchanged from a previous estimate, issued in January, that the government could run short of cash around June 5. But Yellen added some wiggle room, noting federal receipts and outlays are “inherently variable.” The actual date that Treasury exhausts extraordinary measures “could be a number of weeks later than these estimates,” she wrote.