US debt ceiling ‘x-date’ pushed to June 5 as talks continue
U.S. Treasury Secretary Janet Yellen said the government could run out of cash on June 5 to pay all its bills, giving lawmakers a few more days of flexibility to hammer out a deal that would avert an unprecedented debt default.
Yellen’s new estimate, released Friday afternoon, comes as the White House and Republican House lawmakers rush to finalize a deal on government spending that would pave the way for lifting the U.S. borrowing limit and removing a huge cloud of uncertainty hanging over the nation’s economy.
Earlier, Yellen warned that a default could occur as early as June 1. The latest update means there is some breathing room to work out the final details of the deal.
“Based on the most recent data available, we estimate that the Treasury Department will not have sufficient resources to meet the government’s obligations if Congress does not raise or suspend the debt ceiling by June 5,” Yellen wrote in a letter to House Republican Rep. Kevin McCarthy. speaker.
In the letter, Yellen said the Treasury Department could make $130 billion in pension and state health care payments in the first two days of June, but those would be “extremely low in the Treasury.” For the week of June 5, he added: “The planned resources of the Treasury would not be sufficient” to meet its obligations.
President Joe Biden and McCarthy’s negotiators met again on Friday after edging closer to a deal that would raise the U.S. borrowing limit for two years until the 2024 general election, while setting caps that would curb spending growth over the same period. .
But it was still not certain whether a compromise could be reached. “Every time there is more progress, the issues that remain are more difficult and more challenging,” said Patrick McHenry, chairman of the House Financial Services Committee and a top negotiator for House Republicans. “At some point, this thing can come together – or it can go the other way.”
He added that it may take another “one, two, three days” before an agreement is reached.
McCarthy struck a more upbeat tone when he arrived at the Capitol earlier in the morning.
“I’m going to work as hard as I can to do that, to go ahead today and finish the ride. I am completely optimistic,” he said. “It’s really about one thing: it’s about spending. Democrats never wanted to stop spending.”
In an earlier CNN interview, US Deputy Treasury Secretary Wally Adeyemo suggested a deal was close: “I can say we are making progress and our goal is to make sure we get a deal because default is unacceptable. .”
He added: “The President said it and the Speaker said it. And we have to do something by the beginning of June, when the secretary said that we will most likely not have the funds to pay our bills.”
Kristalina Georgieva, managing director of the IMF, warned on Friday that without a deal, the United States would be entering “uncharted territory” and facing “cuts” in spending.
Missing the deadline would affect confidence in treasury markets and “pull the anchor” on the stability of the global financial system, Georgieva said.
“We’ve all read the story Cinderella “Cinderella must leave the ball at exactly midnight,” she said. “And we are at this point. So, before our carriage turns into a pumpkin, can we sort it out?
After the deal, it could take days for the Republican-controlled House of Representatives and the Democratic-controlled Senate to approve a piece of legislation before Biden signs it into law.
The vote in the closely divided House will be especially complicated because well-respected Republican and Democratic lawmakers have expressed displeasure with the emerging deal.
In addition to spending caps for the next two years, the potential compromise is likely to include new work requirements for some social safety net programs, legislation to speed up approvals for major investments and more funding for the Internal Revenue Service to audit the wealthy. taxpayers.
If successful, the deal would remove a major source of risk from the U.S. economy and financial markets, which are struggling with the turmoil in the banking sector and the impact of higher interest rates on curbing inflation.
Negotiations to resolve the fiscal crisis have only begun in recent weeks, forcing Biden to cut short a trip to Asia to follow the talks directly in Washington. Even though a settlement is close, it was still not certain that it would be reached by the end of Friday, meaning the talks could spill over into the long Memorial Day weekend in the US.
U.S. stocks rose, with the S&P 500 up 1.3 percent on reports of progress in debt ceiling talks. Treasury yields rose, primarily as a result of the stronger-than-expected economic data published in the morning.
Additional reporting by Peter Wells in New York