Treasury Secretary Janet L. Yellen said on Friday that the United States will run out of cash to pay its bills on time by June 5, moving the bar slightly while maintaining the urgency for congressional leaders to reach a agreement to increase or suspend the debt. limit.
The letter provided the most precise date for when the United States could run out of cash, which Yellen said could happen as early as June 1. -called X-date.
Still, the letter to lawmakers makes clear the dire financial situation facing the Treasury. The federal government is expected to make more than $130 billion in scheduled payments during the first two days of June — including money for veterans and Social Security and Medicare beneficiaries.
These payments will leave the Treasury Department with “an extremely low level of resources”. Mrs. Yellen went on to detail billions of dollars in needed cash transfers, spending and investments in programs like Social Security and Medicare trust funds that will further deplete her cash reserves.
“Our projected resources would be inadequate to satisfy all these obligations,” wrote Yellen.
Yellen’s letter comes as the White House and House Republicans race to reach a deal that would raise the country’s $31.4 trillion borrowing limit and prevent the United States from defaulting on its debt. The Treasury Department reached its legal debt limit on Jan. 19 and has been employing accounting maneuvers – known as “extraordinary measures” – to ensure the United States can continue to pay its bills on time, as it cannot increase the outstanding debt of the country.
For months, Yellen has been warning lawmakers that the United States could run out of money to pay all its bills on time in early June and as early as June 1.
Mrs. Yellen said earlier this week that she would try to include more precision in her future updates about when a default might occur. Some House Republicans have expressed doubt that a default could be looming so quickly and have urged 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 spokesman Kevin McCarthy, Republican of California, urging party leaders to demand that Yellen “provide full justification” of her projection that The United States States may run out of cash starting June 1st. They accused Yellen of “manipulative timing” and suggested that her predictions should not be trusted because she was wrong about how inflation would rise.
Other independent analyzes have also pinpointed early June as the most likely time the United States will hit date X. The Bipartisan Policy Center said earlier this week that the US faced an “elevated risk” of running out of money to pay its bills. between June 2 and 13 if Congress does not raise or lift the country’s debt limit.
Although negotiators are negotiating 24 hours a day, no deal has been announced. Still, the contours of a deal between the White House and Republicans are taking shape. That deal would increase the debt limit for two years, while also imposing strict limits on discretionary spending not related to the military or veterans over the same period.
While the authorities are negotiating, the federal government is exhausted. The Treasury Department’s cash balance fell to $38.8 billion on Thursday as the United States headed toward running out of cash to pay its financial obligations.
The tight deadline has lawmakers warning that a deal needs to be reached quickly.
“We must be in the last few hours because of the schedule,” said Rep. Patrick McHenry, a North Carolina Republican involved in the talks. “I don’t know if it’s the next day, two or three, but it has to fit.”
Biden administration officials continued to downplay the possibility that the Treasury Department could avoid a default beyond the so-called X date by prioritizing payments to bondholders. They also rejected provocative measures, such as invoking the 14th Amendment as a way to continue borrowing, and instead reiterated calls for Congress to raise the debt limit.
“Congress has the ability to do this, and the president is asking them to act as quickly as possible,” Wally Adeyemo, Deputy Secretary of the Treasury, told CNN on Friday.
In her letter, Mrs. Yellen also laid out the additional accounting maneuvers known as “extraordinary measures” she was taking to delay a possible default until June 5. and the Federal Financing Bank.
“The extremely low level of remaining resources requires me to exhaust all available extraordinary measures to avoid being unable to meet all government commitments,” Yellen wrote.
Financial markets became more jittery as the United States approached the deadline to avoid a possible default. This week, Fitch Ratings said it was putting the nation’s top AAA credit rating on review for possible downgrade. DBRS Morningstar, another ratings company, did the same on Thursday.
Mrs. Yellen pointed out in her letter that the impasse is already overwhelming financial markets.
“We have learned from past debt limit standoffs that waiting until the last minute to suspend or raise the debt limit can do serious damage to business and consumer confidence, increase short-term borrowing costs for taxpayers and impact negatively affect the credit rating of the United States. United States,” she wrote.
Lucas Broadwater contributed reports.