Yellen’s June 1 Deadline May Not be Real

The media and both parties have tended to conflate a shutdown with defaulting. That has never happened with past shutdowns.

The US budget is again teetering on running out of money because the Republicans and Democrats are playing a game of chicken on whether to raise the debt ceiling. The debt ceiling caps how much the US can borrow through issuing bonds. Treasury Secretary Janet Yellen has warned that failure to pay US bondholders will cut revenue to foreign countries, corporations worldwide, US IRA accounts, and personal holdings, which “would undoubtedly cause a recession in the US economy.”

That assessment was backed by Beth Ann Bovino, chief US economist at Standard and Poor’s, who predicted that “the impact of a default by the U.S. government on its debts would be worse than the collapse of Lehman Brothers in 2008, devastating markets and the economy.”

Yellen conditioned this catastrophe from occurring when she said at the beginning of the year, “Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligations.”

But those conditions can be met within a government shutdown. Unfortunately, the media and both parties have tended to conflate a…