WASHINGTON — In a letter sent Monday to House Speaker Kevin McCarthy, Treasury Secretary Janet Yellen said the United States might hit the statutory debt ceiling as early as June 1 if Congress doesn't act.
"After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government's obligations by early June and potentially as early as June 1," Secretary Yellen wrote in the letter.
The debt limit, or ceiling, is the total amount of money the government can borrow to pay its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. It's for bills already incurred by the United States, not new spending.
Never in the history of the debt ceiling has the United States breached the limit. While some in Congress have either said to simply ignore it or that breaching it wouldn't be a big shock, most economists and government watchers say it could be devastating to the U.S. and the global economy.
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Yellen said that as of May 1, it's impossible to give an exact date when Treasury will hit the debt ceiling. It will depend on tax collections in April and May, which have slowed in previous months.
The Treasury Department has been using what it calls "extraordinary measures" for several months to manage the debt ceiling crisis.
While the debt ceiling may seem like an invented Washington crisis, the impacts it could have on the economy and jobs can't be overstated.
Moody’s Analytics said a long-term impasse over the debt ceiling could cause the loss of nearly six million jobs and push unemployment to nine percent. Moody’s also said it could lead to a sell-off on Wall Street that might wipe out $15 trillion in wealth.
The current crisis comes as House Republicans refuse to raise the debt ceiling without massive spending cuts in almost every area of the government except defense. President Joe Biden has refused to negotiate over the debt ceiling and said it should be uncoupled from discussions on spending cuts.
Traditionally, the debt ceiling was raised without issue when either party was in power. That changed in 2011 when the ceiling was weaponized to extract huge spending cuts to programs sought by Congressional Republicans.
