Without action to raise the federal borrowing limit, the federal government could default on its debt soon after December 15, Treasury Secretary Janet Yellen told congressional leaders on Tuesday.
Yellen is highly confident the Treasury would be able to keep the US current on debt payments, financing the government two weeks longer than her initial projection of December 3, but she warned that the country could run out of cash soon after transferring $118 billion to the Highway Trust Fund.
That is in line with the bipartisan infrastructure bill signed Monday by Biden, which the US has to comply with. The bill orders Yellen to transfer the highway funds one month after the measure’s enactment, but that may exhaust the Treasury’s ability to keep the US solvent within days of the transfer.
She pointed that there are scenarios in which Treasury would be left with insufficient remaining resources to continue financing the US government’s operations beyond that date as the federal government’s cash flow is subject to unavoidable variability.
A stream of corporate tax payments expected in mid-December could fill federal coffers enough to keep Treasury from reaching the absolute breaking point and make the accounting trick work now that the US has again exhausted its roughly $28 trillion debt limit.
Yellen noted she’ll keep updating the Congress as more information becomes available, urging the lawmakers at the same time to raise or suspend the debt ceiling as soon as possible to ensure the full faith and credit of the United States, and to give Congress more time to chart a path to avoid a potential catastrophe.
The influx of revenue on Dec. 15, according to outside forecasters, could give the Treasury enough cash to keep paying the government’s bills until late December though the Bipartisan Policy Center, known for its consistent accurate forecasts of the debt limit, came up with slightly more optimistic predictions pushing that date until mid-February.