WASHINGTON – Treasury Secretary Janet Yellen said on Friday that the United States probably has enough reserves to delay a potential debt default until June 5.
“We now estimate that if Congress does not raise or suspend the debt ceiling by June 5, the Treasury Department will not have sufficient resources to meet the government’s obligations,” Yellen wrote in a letter To House Speaker Kevin McCarthy.
Friday’s new date provides some much-needed breathing room in negotiations between the White House and congressional Republicans that appeared to result in a compromise deal on Friday to raise the debt ceiling by two years.
The so-called “X date” was last updated on May 1, when Yellen told Congress that the U.S. has enough cash to meet its obligations until “early June, possibly as early as June 1.” The letter marked the first time since Yellen began sending regular updates to Congress in February that the secretary of state did not use language like “earliest” to specify a date.
Instead, Yellen explained, the Treasury Department will “make more than $130 billion in scheduled payments in the first two days of June,” leaving the agency with “extremely low resource levels.”
“During the week of June 5, the Treasury Department planned approximately $92 billion in payments and transfers,” Yellen continued. “Our projected resources will not be sufficient to meet all of these obligations.”
Markets ended higher on Friday, in part on optimism that the House and Senate would pass the deal and be signed by the president by June 1.
The new date comes amid growing global concern about the U.S. credit rating.
On Wednesday, Fitch credit rating agency announced that it has placed the US’s AAA rating on “Rating Watch Negative.”
On Friday, the IMF preliminary annual assessment “The brinkmanship of the federal debt ceiling could pose further, entirely avoidable, systemic risks to the U.S. and global economies,” administration officials wrote.
A technical default by the U.S., even for just a few days, could push up interest rates and erode confidence in the dollar. Economists point out that America’s adversaries, notably Russia and China, are gleefully watching the current debt-ceiling impasse, convinced that less trust in the dollar will work in their favor.
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