Yellen Warns Again That the U.S. Could Default as Soon as June 1
The so-called X-date could still come as early as next week.
By Alan Rappeport, The New York Times, May 22, 2023
Treasury Secretary Janet L. Yellen reiterated on Monday that the United States could be unable to pay its bills as soon as June 1, an announcement that maintains pressure on the White House and congressional leaders as they negotiate how to raise the nation’s debt limit… Ms. Yellen warned that the nation’s finances remain in a precarious state, saying that it was “highly likely” the United States would run out of cash by early June, rather than her previous letters, which called that time-frame “likely.”…On Monday, Ms. Yellen did not suggest that there might be more time and she warned that failing to lift the debt limit would be disastrous for the economy…Benefits payments to retirees and veterans are likely to be disrupted, and the uncertainty could cause interest rates to surge and stock prices to plunge… [end quote]
This conclusion was seconded by the Bipartisan Policy Center, an influential think tank that carefully tracks federal spending.
The bond market is already responding by bidding up the price of AAA corporate debt higher than Treasuries, which is very unusual. Investors are voting with their cash that Microsoft and JJJ are more likely to pay interest on time than the federal government.
The stock market is holding rock-steady, showing confidence that the potential crisis will be resolved in time.
Wait till the house realizes austerity is not the plan. Why? Why not discuss econ? Why not know what you are doing before you have us default? Why? Promises?
Promises? Like we all got blanked? Nice promise.
Supply side econ at this point it can not even be declared as such.
The 2011 debt ceiling was raised only 2 days before the X-date. There are many tax payments expected on June 15th, and so less risk after that date. Corporations are making plans on what to do with federal contracts that have strict guidelines (should they continue work or pause).
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Yellen: “There will be some bills unpaid if we do not raise the debt ceiling.”
“We recommend that corporates begin to discuss contingency plans for a U.S. government default with their boards of directors. Corporates may also need to consider whether to disclose these contingency plans and the nature of their board of directors’ oversight of such plans in their periodic reporting.”
“BPC projects that if policymakers do not act on the debt limit, Treasury will most likely have insufficient cash to meet all its financial obligations sometime between early June and early August 2023, with an elevated risk between June 2 and June 13 (what we call the X Date).”
“On July 31, 2011, two days prior to when the Treasury estimated the borrowing authority of the United States would be exhausted… raise the debt ceiling”
Trends in Discretionary Outlays (Percentage of GDP):
7.3% average between FY2002 and FY2021
6.6% in FY2022
God Bless austerity. We can run this thing right into the ground like Truss did.
There is no two days before hand solution this time. The losing side of this equation is too steep. The American public should not be losing out to austerity.
Or we could go back to 2010 levels that were still being inflated by unnecessary wars. Discretionary Outlays averaged 7.3% of GDP between FY2002 and FY2021. A target of under 7% would not be austerity.
Austerity would be trying to balance the budget increases of Medicare, Social Security, Defense, and inflation through reductions in taxes and all other programs.
Austerity will be met in the next two weeks with a Truss moment like the UK had. You have no idea that will be happening. The American public and industrialists are going to be giving your nonsense a huge rebuke. Because the talks will fail. This is a win/lose situation.
The odds are a few people flip and the rise in the ceiling gets done.
In the medium run that is the plan. But there are not enough “other programs” to make that anywhere close to a reality.
The only other budget items of significance are the infrastructure buildout to retool US manufacturers. That is also a larger part of the argument. How to $crew the US industrial base for another tax cut.
The numbers for austerity are not real. The bond market is going to spew. The equity market is dropping like a rock.
This wont be resolved till the American public weights in two weeks from now.
Bad politics is ruining everything. It would be nice for both sides to acknowledge they’ve contributed to our debt issue. Cutting revenue without reducing fiscal obligations is no better than spending money you don’t have.
Ironic question finally asked…what is wasteful in the spending…but specific to what can be cut?
Meaning cut the pentagon? Nope on most side. Cut SS nope on several sides. Cut healthcare? Again nope or at least not enough to matter.
Cut education? Okay but now there is nothing to cut.
Cut food stamps? Minor. Cut foreign aide? Minor.
The tax cuts need to stop.
Those who know and want the tax cuts know they never cared about the spending cuts. They only cared about the tax cuts. That is why we have all the debt.
Frankly it is not a problem.
But…
The ship is turning away from supply side econ. We are having growing pains. We need an industrial policy which is demand side economics. The early 80s saw similar growing pains going to supply side econ. The late 40s saw similar growing pains going to demand side econ.
There is going to be a huge fall out if a few people do not flip.