Treasury Secretary Janet L. Yellen said Friday that the United States will run out of money to pay its bills in time for June 5, moving back the goal posts slightly while maintaining the urgency that the leaders of the Congress reach an agreement to increase or suspend the debt limit.
The letter provided the most accurate date yet when the United States is expected to run out of cash. Ms Yellen had previously said the United States could hit the so-called X-date, the time when it doesn’t have enough money to pay all its bills on time, as soon as June 1.
While the letter to lawmakers provides a little leeway, it also makes clear the dire financial situation facing the Treasury. The federal government is required 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 recipients.
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, spending and investments in programs like the Social Security and Medicare trust funds that will further deplete her cash reserves.
“Our projected resources would be inadequate to meet all of these obligations,” Ms. Yellen wrote.
Ms Yellen’s letter comes as the White House and House Republicans have been racing to reach a deal that would raise the nation’s debt ceiling to $31.4 trillion and prevent the United States from defaulting on your debt. The Treasury Department reached its statutory debt limit on January 19 and has been employing accounting maneuvers, known as “extraordinary measures,” to ensure that the United States can continue to pay its bills on time as it cannot increase its debt burden. waiting for the nation
Rep. Patrick McHenry, a North Carolina Republican who is a key player in the talks, said the more precise date from the Treasury Department “puts additional pressure on us.”
Even before the letter was sent, Mr. McHenry said he was aware of how little time was left to avoid a default.
“We have to be in closing hours because of the timeline,” he said. “I don’t know if it’s the next day or two or three, but you have to join.”
For months, Ms Yellen has been warning lawmakers that the United States could run out of cash to pay all its bills on time by early June.
Ms 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 is 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 Chairman Kevin McCarthy, a California Republican, urging party leaders to demand that Ms Yellen “provide a full justification” for his projection that US states could run out of cash as early as June 1. They accused Ms. Yellen of “tampering with the weather” and suggested that she should not be trusted in her forecasts because she was wrong about how high inflation would be.
Other independent analyzes have also pegged early June as the most likely time the United States will hit date X. The Bipartisan Policy Center said earlier this week that the United States faced a “high risk” of running out of cash to pay its bills. accounts between June 2 and June 13 if Congress does not raise or suspend the nation’s debt limit.
While negotiators have been in round-the-clock talks, no deal has yet been announced. Still, the contours of a deal between the White House and the Republicans are taking shape. That agreement would raise the debt limit for two years and place strict caps on discretionary spending not related to the military or veterans for the same period.
While officials have been negotiating, the federal government has been running out of smoke. The Treasury Department’s cash balance fell to $38.8 billion on Thursday as the United States inched toward running out of cash to pay its financial obligations.
Biden administration officials continued to downplay the possibility that the Treasury Department could avoid a default beyond the X date by prioritizing payments to bondholders. They also ruled out provocative measures like invoking the 14th Amendment as a way to keep borrowing, and instead reiterated calls for Congress to remove the debt limit.
“Congress has the ability to do that, and the president is asking them to act on it as quickly as possible,” Wally Adeyemo, the deputy secretary of the Treasury, told CNN on Friday.
In her letter, Ms Yellen also exposed additional accounting maneuvers known as “extraordinary measures” she was taking to delay a potential default until June 5. The actions involved moving $2 billion in Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Bank of Financing.
“The extremely low level of remaining resources demands that you exhaust all available extraordinary measures to avoid being unable to meet all of the government’s commitments,” Ms Yellen wrote.
Financial markets have become more nervous as the United States approaches the deadline to avoid a possible default. This week, Fitch Ratings said it would place the country’s highest AAA credit rating on review for a possible downgrade. DBRS Morningstar, another rating firm, followed suit on Thursday.
Ms Yellen noted in her letter that the standoff is already putting pressure on financial markets.
“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious damage to business and consumer confidence, increase borrowing costs in the short term. for taxpayers and negatively affect the credit rating of the United States. United,” she wrote.
Luke Broadwater contributed reporting.
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