Debt ceiling: Treasury chief Janet Yellen sounds alarm US could run out of cash by June 1

US Treasury Secretary Janet Yellen has raised the alarm that the US could effectively have no cash left to pay its bills by 1 June if the debt ceiling remains unchanged — it needs to be either suspended or raised by Congress.

Yellen said in a letter to Congress that it would be unlikely for the agency to meet all US government payment obligations “potentially as early as June 1” without action by Congress. 

The US federal government has maxed out the current debt limit of $31.4 trillion, so it has no room to borrow under its standard operating procedures, other than to replace maturing debt

The debt ceiling or debt limit is a legislative limit on the amount of national debt that can be incurred by the US Treasury, thus limiting how much money the federal government may pay on the debt it already borrowed by borrowing more money.

Yellen has called on Congress to spin into action without wasting any time to address the $31.4 trillion issue.

President Joe Biden summoned the four top congressional leaders to the White House next week after the Treasury warned the government could run short of cash to pay its bills by June.

It must be noted that the debt ceiling has been raised, extended or revised 78 times since 1960.

This time the Republicans are seeking drastic spending cuts and withdrawal of some populist concessions including President Biden’s student loan write-offs scheme and green energy tax credits – against their support in the House to raise the debt ceiling.

This proposal did not go down well with the Democrats in the Senate and President Biden, who are sticking to their stance of “these issues are non-negotiable".

Reuters reported that the estimate raised the risk that the US is headed for an unprecedented default that would shake the global economy, adding new urgency to political calculations in Washington, where Democrats and Republicans were girding for a months-long standoff.

Biden called Republican House Speaker Kevin McCarthy in Jerusalem, where he is on a diplomatic trip, to invite him to a May 9 White House meeting. The two leaders haven’t sat down to discuss the issue since February.

Biden also extended invitations to House Democratic leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Republican leader Mitch McConnell. McConnell, whose fall in March sidelined him for weeks, said he and Biden had a “good conversation” today, adding: “I’m sure we’ll be speaking again.”