Janet Yellen says the government could run out of money and trigger an economic crisis as soon as June 1

• Treasury Secretary Janet Yellen said that the government could run out of money as soon as June 1.

• In a letter to House Speaker Kevin McCarthy, Yellen urged Congress to raise the debt ceiling.

• Democrats have torpedoed a GOP proposal that would raise the ceiling for a year and make massive cuts.

The US could fall into an unprecedented economic crisis that will cost millions of jobs and roil the global economy as soon as June 1, according to Treasury Secretary Janet Yellen.

In a letter to House Speaker Kevin McCarthy, Yellen said that the government will default on its obligations by early June if Congress does not step in to raise or address the debt ceiling.

The looming X-date — which refers to the projected day the government runs out of money — comes after House Republicans narrowly pushed through a package that would pair a one-year debt ceiling hike with massive spending cuts, including banning student-loan forgiveness and strengthening work requirements for welfare programs.

"Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments," Yellen wrote.

But Congressional action still seems like a far-off reality, as Democrats pronounce House Republicans' plan dead on arrival. Moody's Analytics found that the Limit, Save, Grow Act of 2023 — which narrowly squeaked by in the House, with some Republicans still not on board — would cost the country 780,000 jobs by the end of 2024, and its short-term raise could further exacerbate economic uncertainty. Senate Majority Leader Chuck Schumer said on Monday that that legislation has "has no hope of ever becoming law," and, if anything, it means that "MAGA House Republicans actions have increased the likelihood of default."

President Joe Biden has also vowed to veto the legislation if it lands on his desk, pushing instead for a clean increase without caveats and addendums.

A default would plunge the US into an unknowable economic crisis, destabilizing both the country and the worldwide economy. Even if the breach is short-lived, that could cost Americans nearly a million jobs and a mild recession by the end of the year, per Moody's; a longer crisis could result in 2.6 million jobs lost.

"If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests," Yellen wrote. "I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible."

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