Treasury Secretary Janet L. Yellen said Friday that the United States will run out of money to pay its bills on time by June 5, moving the goal post back slightly while maintaining urgency for congressional leaders to reach an agreement about raising or suspending the debt limit.
The letter gave the most precise date yet for when the United States is expected to run out of money. Ms Yellen had previously said the nation could meet the so-called X date – the point when it doesn’t have enough money to pay all its bills on time – as early as June 1.
Ms. Yellen’s letter comes as the White House and House Republicans race to reach a deal that would lift the country’s $31.4 trillion borrowing limit and prevent the United States from paying its debts. would not comply. The Treasury Department reached its legal debt limit on Jan. 19 and has employed accounting maneuvers — known as “extraordinary measures” — to ensure the United States continues to pay its bills on time.
On Friday evening, President Biden expressed the hope that an agreement could be reached soon.
“It looks good. I am very optimistic,” Mr. Biden said as he left the White House for Camp David, adding: “I hope that Good know tonight if we can make a deal.”
While Ms Yellen’s letter to lawmakers offers a little wiggle room, it also makes clear the dire financial situation facing the Treasury Department. The federal government is due to make more than $130 billion in scheduled payments during the first two days of June, including money to veterans and recipients of Social Security and Medicare.
Those payments will leave the Treasury Department with “an extremely low level of resources”. Ms. Yellen went on to detail billions of dollars in required cash transfers, expenditures and investments in programs such as Social Security and Medicare trust funds that will further deplete her cash reserves.
“Our projected resources would be insufficient to meet all of these obligations,” Ms Yellen wrote.
Representative Patrick T. McHenry, a North Carolina Republican who is a key player in the talks, said the Treasury Department’s more precise date “puts additional pressure on us.”
Even before the letter was sent, Mr McHenry said he knew how little time was left to avoid a default.
“We have to be at closing time because of the timeline,” he said. “I don’t know if it’s in two or three days, but it has to come together.”
For months, Ms. Yellen warned lawmakers that the United States could run out of money to pay all its bills on time by early June.
The finance minister said earlier this week that she would try to include more precision in her future updates on when a default might occur. Some House Republicans have expressed doubt that bankruptcy could be approaching so quickly, and have called on the Treasury Secretary to appear before Congress and present her full analysis.
Earlier this week, members of the House Freedom Caucus, a group of conservative Republicans, wrote a letter to California Republican Speaker Kevin McCarthy urging party leaders to demand that Ms. Yellen “give full justification” of her projection that the United States could run out of money from June 1. They accused Ms Yellen of “manipulative timing” and suggested that her forecasts should not be trusted because she was wrong about how hot inflation was going to get.
Other independent analysis has also pinned early June as the most likely time for the United States to hit the X date. The Bipartisan Policy Center said earlier this week that the US faced an “increased risk” of running out of cash to pay its bills between June 2 and June 13 if Congress does not raise or suspend the country’s debt limit.
Although negotiators are in talks 24 hours a day, no deal has yet been announced. Still, the contours of an agreement between the White House and Republicans are beginning to take shape. That deal would raise the two-year debt limit while imposing strict limits on discretionary spending not related to the military or veterans for the same time period.
While officials have negotiated, the federal government has gone up in smoke. The Treasury Department’s cash balance fell to $38.8 billion on Thursday as the United States was on track to run out of money to meet its financial obligations.
Biden administration officials continued to downplay the possibility that the Treasury Department could avoid a post-X date default by prioritizing payments to bondholders. They also rejected provocative moves, such as invoking the 14th Amendment as a way to continue borrowing, and instead reiterated calls for Congress to lift the debt limit.
“Congress has the ability to do that, and the president is urging them to act on that as soon as possible,” Wally Adeyemo, the deputy secretary of the treasury, told CNN Friday.
White House National Economic Council director Lael Brainard urged negotiators to redouble their efforts to close a deal.
“Negotiators have made progress in recent days toward a reasonable, bipartisan budget agreement, and the secretary’s letter underscores the urgent need for Congress to act quickly to avoid a default,” Ms. Brainard said.
In her letter, Ms. Yellen also outlined the additional accounting maneuvers known as “extraordinary measures” she took to delay a possible default until June 5. and the Federal Finance Bank.
“The extremely low level of remaining funds requires me to exhaust all available extraordinary measures to avoid being unable to meet all government commitments,” Ms Yellen wrote.
Financial markets have become more jittery as the United States moves closer to the deadline to avoid a possible default. This week, Fitch Ratings said it is placing the country’s top AAA rating on review for a possible downgrade. DBRS Morningstar, another rating agency, did the same on Thursday.
Ms Yellen pointed out in her letter that the deadlock is already putting pressure on financial markets.
“We have learned from previous debt limit deadlocks that waiting until the last minute to suspend or raise the debt limit can seriously damage business and consumer confidence, increase short-term borrowing costs for taxpayers, and negatively impact on the creditworthiness of the United States. States,” she wrote.
Luke Broadwater reporting contributed.
