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The U.S. could hit the debt ceiling by June 1, much sooner than expected, Yellen warns
Last edited Mon May 1, 2023, 06:45 PM - Edit history (3)
Source: CNBC
WASHINGTON — Treasury Secretary Janet Yellen on Monday warned that the United States may run out of measures to pay its debt obligations by June 1, earlier than the government and Wall Street had been expecting.
In a letter to House Speaker Kevin McCarthy, Yellen said new data on tax receipts forced the department to move up its estimate of when the Treasury Department “will be unable to continue to satisfy all of the government’s obligations” to potentially as early as June 1, if Congress doesn’t raise or suspend the debt limit before then.
This date is earlier than Wall Street economists were expecting. Goldman Sachs’ latest estimate this week put the deadline at some point in late July, though the bank’s economists acknowledged that weaker-than-expected tax receipts could advance that timeline.
On Monday, President Joe Biden called the “big four” congressional leaders — Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, McCarthy and House Democratic Leader Hakeem Jeffries — to invite them to a May 9 meeting at the White House to discuss the debt limit, a White House official told NBC. The Congressional Budget Office also revised its estimate for the so-called x-date on Monday.
Read more: https://www.cnbc.com/2023/05/01/treasury-debt-limit-measures-may-run-out-by-june-1-yellen-says-in-letter-to-mccarthy.html
Article updated.
Previous articles/headline -
WASHINGTON -- Treasury Secretary Janet Yellen on Monday warned that the United States may run out of measures to pay its debt obligations by June 1, earlier than the government and Wall Street had been expecting.
In a letter to House Speaker Kevin McCarthy, Yellen said new data on tax receipts forced the department to move up its estimate of when the Treasury Department "will be unable to continue to satisfy all of the government's obligations" to "potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time."
This date is earlier than Wall Street economists were expecting. Goldman Sachs' latest estimate this week put the deadline at some point in late July, though the bank's economists acknowledged that weaker-than-expected tax receipts could move that timeline up further.
On Monday, President Joe Biden called the "big four" congressional leaders: Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, McCarthy and House Democratic Leader Hakeem Jeffries to invite all four men to a May 9 meeting at the White House to discuss the debt limit, a White House official told NBC. The Congressional Budget Office also revised its estimate for the so-called X-date on Monday.
In a letter to House Speaker Kevin McCarthy, Yellen said new data on tax receipts forced the department to move up its estimate of when the Treasury Department "will be unable to continue to satisfy all of the government's obligations" to "potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time."
This date is earlier than Wall Street economists were expecting. Goldman Sachs' latest estimate this week put the deadline at some point in late July, though the bank's economists acknowledged that weaker-than-expected tax receipts could move that timeline up further.
On Monday, President Joe Biden called the "big four" congressional leaders: Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, McCarthy and House Democratic Leader Hakeem Jeffries to invite all four men to a May 9 meeting at the White House to discuss the debt limit, a White House official told NBC. The Congressional Budget Office also revised its estimate for the so-called X-date on Monday.
Treasury debt limit measures may run out by June 1, Yellen says in letter to McCarthy
WASHINGTON -- Treasury Secretary Janet Yellen on Monday warned that the United States may run out of measures to pay its debt obligations by June 1, earlier than the government and Wall Street had been expecting.
In a letter to House Speaker Kevin McCarthy, Yellen said new data on tax receipts forced the department to move up its estimate of when the Treasury Department "will be unable to continue to satisfy all of the government's obligations" to "early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time."
This date is earlier than Wall Street economists were expecting. Goldman Sachs' latest estimate this week put the deadline at some point in late July, though the bank's economists acknowledged that weaker-than-expected tax receipts could move that timeline up further. The Congressional Budget Office also revised its estimate for the so-called X-date on Monday.
"Because tax receipts through April have been less than the Congressional Budget Office anticipated in February, we now estimate that there is a significantly greater risk that the Treasury will run out of funds in early June," wrote CBO director Phill Swagel.
WASHINGTON -- Treasury Secretary Janet Yellen on Monday warned that the United States may run out of measures to pay its debt obligations by June 1, earlier than the government and Wall Street had been expecting.
In a letter to House Speaker Kevin McCarthy, Yellen said new data on tax receipts forced the department to move up its estimate of when the Treasury Department "will be unable to continue to satisfy all of the government's obligations" to "early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time."
This date is earlier than Wall Street economists were expecting. Goldman Sachs' latest estimate this week put the deadline at some point in late July, though the bank's economists acknowledged that weaker-than-expected tax receipts could move that timeline up further. The Congressional Budget Office also revised its estimate for the so-called X-date on Monday.
"Because tax receipts through April have been less than the Congressional Budget Office anticipated in February, we now estimate that there is a significantly greater risk that the Treasury will run out of funds in early June," wrote CBO director Phill Swagel.
Original article -
WASHINGTON -- Treasury Secretary Janet Yellen said Monday in a letter to House Speaker Kevin McCarthy that new data on tax receipts has forced the agency to move up its estimate of when the Treasury Department "will be unable to continue to satisfy all of the government's obligations" to "early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time."
"This estimate is based on currently available data, as federal receipts and outlays are inherently variable, and the actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates," Yellen wrote.
This is breaking news. Please check back for updates.
"This estimate is based on currently available data, as federal receipts and outlays are inherently variable, and the actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates," Yellen wrote.
This is breaking news. Please check back for updates.
16 replies
= new reply since forum marked as read
= new reply since forum marked as read
I didn't file my tax return yet
the Credit Raters downgraded the U.S. credit rating -
S&P was in first with their shot -
2011
US loses AAA credit rating after S&P downgrade
Published
6 August 2011
One of the world's leading credit rating agencies, Standard & Poor's, has downgraded the United States' top-notch AAA rating for the first time ever. S&P cut the long-term US rating by one notch to AA+ with a negative outlook, citing concerns about budget deficits.
The agency said the deficit reduction plan passed by the US Congress on Tuesday did not go far enough.
Correspondents say the downgrade could erode investors' confidence in the world's largest economy. It is already struggling with huge debts, unemployment of 9.1% and fears of a possible double-dip recession.
The downgrade is a major embarrassment for the administration of President Barack Obama and could raise the cost of US government borrowing. This in turn could trickle down to higher interest rates for local governments and individuals.
(snip)
https://www.bbc.com/news/world-us-canada-14428930
Published
6 August 2011
One of the world's leading credit rating agencies, Standard & Poor's, has downgraded the United States' top-notch AAA rating for the first time ever. S&P cut the long-term US rating by one notch to AA+ with a negative outlook, citing concerns about budget deficits.
The agency said the deficit reduction plan passed by the US Congress on Tuesday did not go far enough.
Correspondents say the downgrade could erode investors' confidence in the world's largest economy. It is already struggling with huge debts, unemployment of 9.1% and fears of a possible double-dip recession.
The downgrade is a major embarrassment for the administration of President Barack Obama and could raise the cost of US government borrowing. This in turn could trickle down to higher interest rates for local governments and individuals.
(snip)
https://www.bbc.com/news/world-us-canada-14428930
At the time, Treasury found an error in S&P's calculations that prompted what would be their ratings snafu -
(snip)
WEEKEND WONKBOOK – the error Treasury found: In constructing discretionary spending over the 10-year window, S&P took the alternative fiscal scenario and subtracted $900 billion. The alternative fiscal scenario assumed that discretionary spending would grow with nominal GDP growth – on average, about 5 percent a year over the next 10 years. The $900 billion was taken from a CBO score of the savings from discretionary spending caps, relative to CBO’s March 2011 baseline. That baseline assumes that discretionary spending grows with inflation – on average, about 2 percent a year over the next 10 years. So the March 2011 baseline is about $2 trillion lower than the alternative fiscal scenario. S&P initially was using 93 percent as a projected debt-to-GDP figure for 2021. Apres correction, it was 85 percent, a difference of about $2 trillion.
EVEN WONKIER: In the report, S&P publishes net public debt, which includes federal debt, plus state and local debt. The net public debt numbers started out at 93 percent of GDP in the draft, and were corrected to 85 percent. The federal debt, which S&P doesn’t report, changed from 87 percent of GDP, down to 79 percent of GDP.
(snip)
https://www.politico.com/tipsheets/playbook/2011/08/tragic-us-toll-as-taliban-shoots-down-special-ops-chopper-in-afghanistan-treasury-frantically-rips-s-p-draft-rationale-for-downgrade-forcing-changes-s-p-strips-us-aaa-status-003186
WEEKEND WONKBOOK – the error Treasury found: In constructing discretionary spending over the 10-year window, S&P took the alternative fiscal scenario and subtracted $900 billion. The alternative fiscal scenario assumed that discretionary spending would grow with nominal GDP growth – on average, about 5 percent a year over the next 10 years. The $900 billion was taken from a CBO score of the savings from discretionary spending caps, relative to CBO’s March 2011 baseline. That baseline assumes that discretionary spending grows with inflation – on average, about 2 percent a year over the next 10 years. So the March 2011 baseline is about $2 trillion lower than the alternative fiscal scenario. S&P initially was using 93 percent as a projected debt-to-GDP figure for 2021. Apres correction, it was 85 percent, a difference of about $2 trillion.
EVEN WONKIER: In the report, S&P publishes net public debt, which includes federal debt, plus state and local debt. The net public debt numbers started out at 93 percent of GDP in the draft, and were corrected to 85 percent. The federal debt, which S&P doesn’t report, changed from 87 percent of GDP, down to 79 percent of GDP.
(snip)
https://www.politico.com/tipsheets/playbook/2011/08/tragic-us-toll-as-taliban-shoots-down-special-ops-chopper-in-afghanistan-treasury-frantically-rips-s-p-draft-rationale-for-downgrade-forcing-changes-s-p-strips-us-aaa-status-003186
Interestingly enough, S&P had been under SEC investigation and suddenly this happens.
S&P eventually settled multiple instances of their ratings malfeasance.
2012
Smaller rater Eagan-Jones cut the rating twice -
Financials
April 6, 2012 10:35 AM Updated 11 years ago
Egan-Jones cuts U.S. rating on debt burden
By Richard Leong
3 Min Read
NEW YORK, April 6 (Reuters) - Egan-Jones Ratings downgraded the credit level of the United States as Washington has struggled to reduce the federal debt burden, which is projected to surpass the size of the country’s economy.
The independent rating firm, which issued the downgrade late Thursday, said its senior debt rating on the United States is now AA, its third highest rating, down one notch from AA-plus.
It also maintained a negative watch on the world’s biggest economy as the federal debt load could rise to $16.7 trillion at the end of 2012. U.S. gross domestic product, in the meantime, could grow to $15.7 trillion, assuming it would grow at a rate of 2.5 percent, the firm said.
The firm downgraded the United States for second time in less than nine months “because of the lack of any tangible progress on addressing the problems and the continued rise in debt to GDP,” said Sean Egan, co-founder of firm, in an e-mail statement.
(snip)
https://www.reuters.com/article/ratings-usa-egan-idUSL2E8F629N20120406
April 6, 2012 10:35 AM Updated 11 years ago
Egan-Jones cuts U.S. rating on debt burden
By Richard Leong
3 Min Read
NEW YORK, April 6 (Reuters) - Egan-Jones Ratings downgraded the credit level of the United States as Washington has struggled to reduce the federal debt burden, which is projected to surpass the size of the country’s economy.
The independent rating firm, which issued the downgrade late Thursday, said its senior debt rating on the United States is now AA, its third highest rating, down one notch from AA-plus.
It also maintained a negative watch on the world’s biggest economy as the federal debt load could rise to $16.7 trillion at the end of 2012. U.S. gross domestic product, in the meantime, could grow to $15.7 trillion, assuming it would grow at a rate of 2.5 percent, the firm said.
The firm downgraded the United States for second time in less than nine months “because of the lack of any tangible progress on addressing the problems and the continued rise in debt to GDP,” said Sean Egan, co-founder of firm, in an e-mail statement.
(snip)
https://www.reuters.com/article/ratings-usa-egan-idUSL2E8F629N20120406
Similar to S&P, Eagan-Jones had been under SEC investigation and eventually settled a year later.
2013
In 2013, Fitch did their thing (but didn't "downgrade" )-
Rating Action Commentary
Fitch Places United States' 'AAA' on Rating Watch Negative
Tue 15 Oct, 2013 - 4:44 PM ET
Fitch Ratings-New York/London-15 October 2013: Fitch Ratings has placed the United States of America's (U.S.) 'AAA' Long-term foreign and local currency Issuer Default Ratings (IDRs) on Rating Watch Negative (RWN). The ratings of all outstanding U.S. sovereign debt securities have also been placed on RWN, as has the U.S. Short-term foreign currency rating of 'F1+'. The Outlook on the Long-term ratings was previously Negative. The U.S. Country Ceiling has been affirmed at 'AAA'.
Fitch expects to resolve the RWN by the end of Q114 at the latest, although timing would necessarily reflect developments and events, including the duration of any agreement to raise the debt ceiling.
KEY RATING DRIVERS
In line with Fitch's previous statements, the RWN reflects the following key rating drivers and their relative weights:
High
- The U.S. authorities have not raised the federal debt ceiling in a timely manner before the Treasury exhausts extraordinary measures. The U.S. Treasury Secretary has said that extraordinary measures will be exhausted by 17 October, leaving cash reserves of just USD30bn. Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.
(snip)
https://www.fitchratings.com/research/sovereigns/fitch-places-united-states-aaa-on-rating-watch-negative-15-10-2013
Fitch Places United States' 'AAA' on Rating Watch Negative
Tue 15 Oct, 2013 - 4:44 PM ET
Fitch Ratings-New York/London-15 October 2013: Fitch Ratings has placed the United States of America's (U.S.) 'AAA' Long-term foreign and local currency Issuer Default Ratings (IDRs) on Rating Watch Negative (RWN). The ratings of all outstanding U.S. sovereign debt securities have also been placed on RWN, as has the U.S. Short-term foreign currency rating of 'F1+'. The Outlook on the Long-term ratings was previously Negative. The U.S. Country Ceiling has been affirmed at 'AAA'.
Fitch expects to resolve the RWN by the end of Q114 at the latest, although timing would necessarily reflect developments and events, including the duration of any agreement to raise the debt ceiling.
KEY RATING DRIVERS
In line with Fitch's previous statements, the RWN reflects the following key rating drivers and their relative weights:
High
- The U.S. authorities have not raised the federal debt ceiling in a timely manner before the Treasury exhausts extraordinary measures. The U.S. Treasury Secretary has said that extraordinary measures will be exhausted by 17 October, leaving cash reserves of just USD30bn. Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.
(snip)
https://www.fitchratings.com/research/sovereigns/fitch-places-united-states-aaa-on-rating-watch-negative-15-10-2013
Fitch later updated their "outlook" to "negative" again after removing the "negative" in 2014 in 2020 but didn't downgrade.
So outside of any actual funding issues for many things (aside from salaries - although note that some funding is actually not appropriated but is from things like payroll taxes, etc), there are other impactful things that can and have happened during hostage-taking scenarios, like credit ratings downgrades.