In letters to Congress and business leaders, Treasury Secretary Janet Yellen warns she doesn't know the exact date
Discussing the devastating consequences of a possible US default, Treasury Secretary Janet Yellen has repeatedly warned that she is unable to know the exact date the federal government will run out of money. cash.
The United States hit the $31.4 trillion debt limit on Jan. 19, forcing the Treasury Department — which borrows to pay its obligations — to make accounting maneuvers to conserve cash. Yellen has sent letters to both business leaders and Congress.
On Monday, the minister reiterated earlier warnings that the finance ministry was likely to run out of cash by June 1. However, the exact date when the United States will reach the so-called X-day is almost impossible to determine.
While the Treasury Department has the most sophisticated cash management system in the world and employs teams of trained economists, it's hard to tell how much money is left in the “treasury”.
Big bills coming
Yellen considers the beginning of June a critical period. The reason: The federal government traditionally spends a lot of money in a short period of time, and it's impossible to predict exactly how much revenue will flow in and when. In a report released Thursday, the Bipartisan Policy Center, a think tank that closely monitors federal spending, estimated that the administration will spend $101 billion on June 1.
Most of that money—$47 billion—will go to federal health care, with the rest going to veterans' benefits, military pay and pensions, and public employee pensions. On June 2, the government must pay $25 billion for Social Security benefits and another $2 billion for federal Medicare.
Revenues deflate
A big problem this year is that tax revenues are not collected when expected. Severe storms, flooding and mudslides in California, Alabama and Georgia this year prompted the Internal Revenue Service to push back tax filing deadlines in dozens of counties to October.
The June 15 is a critical day
If Yellen can come up with cash by June 15, the US will get a little breather because that's when taxes are paid by corporations and those who have chosen to pay their quarterly tax obligations. The Congressional Budget Office said in a report last week that the expected influx of quarterly tax revenue on June 15 will likely allow the government to continue funding its operations at least through the end of July.
The government could receive about $80 billion in tax revenue that day. The Bipartisan Policy Center estimates that these funds could be sufficient through June 30. Yellen may also take some additional emergency measures, such as suspending government investments in federal employee coffers and possibly delaying a default until July.
Hard to estimate.
The lack of clarity on the X date makes it unclear how much time lawmakers have to reach an agreement. But the pressure is still mounting. Congress is likely to take days – if not weeks – to pass legislation to raise the debt ceiling. And even if President Biden and House Speaker Kevin McCarthy reach a deal, there's no guarantee the House and Senate will comfortably pass the legislation.
McCarthy and Democratic New York Sen. Chuck Schumer, the majority leader, will have to push the legislation through the respective chambers, and the days left to do so are running out. The House of Representatives is only scheduled to meet for six days before the end of the month. The Senate has just five.
Given that lawmakers are reluctant to adjourn, analysts are watching the legislative schedule closely. “The congressional calendar is the most critical and will dictate the dates a bill passes, as it has historically,” Henrietta Trease, director of economic policy at Veda Partners, said in a note to clients this month.
< p>Source: New York Times
