Treasury Expects to Run Out of Cash by June 5
Treasury Secretary Janet L. Yellen said on Friday that the United States could run out of money to pay its bills on time by June 5, moving the goal-post slightly while maintaining the urgency for congressional leaders to reach a deal to raise or suspend the debt limit.
The letter gave the most specific timeline to date for when the United States could run out of cash and provides a tiny bit of wiggle room from the June 1 date that many had been assuming was the so-called X-date.
Ms. Yellen’s letter comes as the White House and House Republicans have been racing to agree on a deal that would lift the nation’s $31.4 trillion borrowing cap and prevent the United States from defaulting on its debt. The Treasury Department hit the debt limit on Jan. 19 and has since been employing accounting maneuvers to ensure the United States can continue paying its bills on time.
For months, Ms. Yellen has been warning lawmakers that the U.S. could run out of cash to pay all of its bills on time in early June and as soon as June 1. On Friday, she detailed that the federal government is due to make more than $130 billion in scheduled payments during the first two days of June — including payments to veterans and Social Security and Medicare recipients — leaving the Treasury Department with “an extremely low level of resources.”
“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,” Ms. Yellen wrote.
While negotiators have been in round-the-clock talks, no deal has been announced. Still, the contours of an agreement between the White House and Republicans are taking shape. That deal would raise the debt limit for two years while imposing strict caps on discretionary spending not related to the military or veterans for the same period.
As officials have been negotiating, the federal government has been running on fumes. 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 meet its financial obligations.
The tight deadline has lawmakers warning that a deal needs to be reached quickly.
“We’ve got to be in the closing hours because of the timeline,” said Representative Patrick McHenry, a North Carolina Republican involved in the talks. “I don’t know if it’s in the next day or two or three, but it’s got to come together.”
Biden administration officials continued to downplay the possibility that the Treasury Department could continue to avoid a default beyond the so-called X-date by prioritizing payments to bondholders. They also dismissed provocative steps such as invoking the 14th Amendment as a way to continue borrowing and instead reiterated calls on Congress to lift the debt limit.
“Congress has the ability to do that, and the president is calling on them to act on that as quickly as possible,” Wally Adeyemo, the deputy Treasury secretary, told CNN on Friday.
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 could really be approaching so quickly, and they have called on the Treasury secretary to appear before Congress and present her full analysis.
Luke Broadwater contributed reporting.