Yellen: 'Highly likely' debt brink is early June

Treasury Secretary Janet Yellen amplified her warning to congressional leaders on Monday that the U.S. risks running out of borrowing power in just 10 days, as President Joe Biden and Speaker Kevin McCarthy look to salvage debt ceiling talks that nearly crumbled over the weekend.

In a new letter, Yellen added that "it is highly likely" the Treasury Department won't be able to pay the bills in early June, potentially as soon as June 1. Thanks to a disappointing tax season that yielded less revenue than expected, it's unclear whether the department can make it to June 15, when quarterly tax receipts come in. If Treasury can make it to the middle of next month, the department would unlock a cascade of cash that would keep the country safe from default through July or even August.

Yellen’s latest warning about the so-called X-date, now delivered weekly, continues to pile on the urgency as Biden and McCarthy plan to meet again at the White House on Monday night. Despite some optimism last week that Republicans and Biden officials were making progress toward an agreement to lift the nation’s $31.4 trillion borrowing cap, both sides spent the weekend accusing each other of moving backward in negotiations by making increasingly partisan offers.

McCarthy told reporters in the Capitol on Monday that he still thinks it’s possible to beat Yellen’s June 1 target for action to raise the debt limit, which would require negotiators to strike a deal in just a matter of days.

Complicating the time crunch is the congressional calendar, although both chambers can always quickly change their plans. The House is scheduled for a break the week of May 29, while the Senate is out this week, with Senate Majority Leader Chuck Schumer warning lawmakers in the upper chamber that they will have 24-hours notice if they are needed back in town for action on the debt ceiling.

Over the weekend, Yellen said June 1 is a “hard deadline," despite the contentions of some Republicans who have disputed the X-date warning as a political ploy. “The odds of reaching June 15th while being able to pay all of our bills is quite low," the secretary said.

Another estimate from Mark Zandi, the chief economist for Moody’s Analytics, puts the drop dead date at June 8, which would give lawmakers another critical week to tie up the legislative loose ends, if they're able to hammer out an agreement. For now, Republican and White House negotiators are treating June 1 as their cutoff date for action, so the U.S. doesn't stumble into an economy-rattling default.

“I think June 1 is the earliest X-date possible, but the most likely X-date is June 8,” Zandi said in an interview last week. “If I’m wrong, then the next likely X-date is in late July.”