The Blubber

On Monday, the U.S. Treasury Department emphasized once again its projection that, barring a hike in the debt limit, it will only be able to honor the U.S. government's financial obligations until June 1. This statement further intensifies the pressure on congressional Republicans and the White House to find a resolution soon.

Janet Yellen, the Treasury Secretary, sent her second letter to Congress in a fortnight, reinforcing the likelihood that the Treasury may be unable to fulfill all U.S. government payments by early June. This could lead to the first-ever U.S. default. Yellen indicated that the debt ceiling might come into effect as early as June 1.

The adjusted date comes in the wake of updated revenue and payment data received since Yellen's May 1 communication to Congress. At that time, she warned that the Treasury might deplete its cash reserves to cover government expenditures by early June, possibly even by June 1. This announcement precedes President Joe Biden's scheduled meeting with House Speaker Kevin McCarthy and an upcoming overseas trip for the President.

Yellen, in her recent letter, specified that the exact date when the Treasury depletes its extraordinary measures could extend several days or weeks beyond the projected estimates. This represents a slight deviation from her May 1 letter that cautioned of a delay of only "a number of weeks later." She pledged to provide another update to Congress next week as additional data becomes accessible.

On Wednesday, Biden embarks on a journey to Japan for a Group of Seven leaders summit, followed by a visit to Australia - a trip that will span about a week. McCarthy stated on Monday that the prolonged staff-level discussions over the weekend had not yielded any progress.

Yellen has continually stressed the potential for a "constitutional crisis" and an "economic and financial catastrophe" for both the U.S. and global economies if Congress fails to augment the $31.4 trillion federal debt ceiling.

The non-partisan Congressional Budget Office (CBO) recently warned of a "significant risk" that the United States could default on its payment obligations in the initial two weeks of June without a debt ceiling increase. Meanwhile, some analysts, including the CBO, speculate that the Treasury could avoid a default until August, provided it can utilize the quarterly tax payments due June 15 and new borrowing measures available from June 30.

In her Monday letter, Yellen advocated for swift action, cautioning that procrastinating until the eleventh hour to suspend or boost the debt limit could inflict significant damage to business and consumer confidence, escalate short-term borrowing expenses for taxpayers, and negatively affect the United States' credit rating. She pointed out that the Treasury's borrowing costs for securities maturing in early June have already seen a substantial rise.

Yellen warned that if Congress doesn't raise the debt limit, it could result in severe difficulties for American families, tarnish the United States' global leadership standing, and raise doubts about the nation's ability to safeguard its national security interests.