The U.S. government could run out of cash as soon as June 2 if Congress doesn’t raise the federal borrowing limit, according to a new analysis released Tuesday by the Bipartisan Policy Center.
The think tank said in a statement that it “estimates an elevated risk that the debt limit X date — when the United States will no longer be able to meet its obligations in full and on time — could fall early in BPC’s range of early June to early August, specifically between June 2 and June 13. To avoid the worst risks associated with nearing or crossing the X date, policymakers should act as soon as possible.”
On May 8, the BPC had estimated that the U.S. government was likely to have insufficient cash to meet all of its financial obligations until sometime between early June and early August if there wasn’t a debt-limit hike.
The think tank’s latest projection comes after a meeting Monday evening between President Joe Biden and House Speaker Kevin McCarthy at the White House over raising the U.S. debt ceiling and avoiding a market-shaking default. Both sounded somewhat upbeat after their parley, describing it as “productive.” More talks are planned.
Treasury Secretary Janet Yellen warned in a letter after the market’s close on Monday that it’s “highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1.” That echoed warnings that she offered last week and on May 1.
In August 2011, lawmakers approved an increase to the limit just hours before a potential government default. Within days, the U.S. lost its triple-A credit rating from S&P for the first time in history, with the ratings company saying the American political system had become less stable.
U.S. stocks
SPX,
DJIA,
plunged in August 2011 following that downgrade from S&P.
Read the full article here