Treasury Secretary Janet Yellen warned congressional leadership Tuesday that the federal government could default on its debt next month if they don’t take action to raise the debt ceiling.
In a letter to top lawmakers, Ms. Yellen projected that after Dec. 15, there are scenarios in which the Treasury could have “insufficient resources to continue to finance the operation of the U.S. government.”
Ms. Yellen added that she has “a high degree of confidence” in the Treasury’s ability to make debt payments through Dec. 15. That’s two weeks longer than her initial forecast of Dec. 3.
However, she warned that the U.S. could run out of money shortly after transferring $118 billion to the Highway Trust Fund to comply with the bipartisan infrastructure bill Mr. Biden signed into law this week.
The bill requires Ms. Yellen to transfer highway funds exactly one month after its enactment, which would be Dec. 15. Ms. Yellen said the Treasury may not be able to keep the U.S. solvent after it moves the funds.
“As the federal government’s cash flow is subject to unavoidable variability, I will continue to update Congress as more information becomes available,” she wrote.
Ms. Yellen has repeatedly warned that a default would lead to economic chaos, including a recession and jeopardizing the U.S. dollar’s role as the global reserve currency.
Congress passed a stopgap debt ceiling increase in early October, but it’s unlikely that the Democrats will be able to pass the next increase along party lines.