Yellen reiterates early-June debt limit risk amid cross-party negotiations
The update will disappoint those lawmakers who had hoped the potential June deadline would slip into July or August, allowing more time for a debt deal.
The country is still at risk of defaulting in early June, Treasury Secretary Janet Yellen reiterated Monday, maintaining heavy pressure on the breakneck debt talks between the White House and Republicans.
The new forecast suggests bipartisan negotiations to raise the nation’s borrowing cap could truly come down to the wire, with the elusive so-called X-date potentially less than three weeks away. Yellen’s update is sure to disappoint lawmakers who were looking for more time, hoping two June cash bumps could waive off the risk of default until July or August.
President Joe Biden and congressional leaders are set to meet at the White House on Tuesday as staff-level talks continue over a deal that could potentially lift the nation’s borrowing cap and restrict federal spending.
With time rapidly running out, Speaker Kevin McCarthy said Monday that the main four congressional leaders and Biden may need to reach an agreement by this weekend, an incredibly ambitious timeline. Both sides remain vastly far apart on a number of substantial issues.
Before the secretary’s new debt estimate, forecasters have said there could still be a possibility that the country might be able to avoid a default through July and possibly into August.
If Treasury can keep paying the bills through June 15, tens of billions of dollars would begin to flow in from corporations, self-employed people and some other taxpayers required to pay taxes on a quarterly basis. That could give the federal government enough of a cushion to last until June 30, when Treasury can tap into about $145 billion in additional resources.
But Yellen’s letter suggests there is little chance of avoiding a default for months more, while cautioning that Treasury’s estimates could still change. Yellen said she’ll provide congressional leaders with another update next week.
The warning comes after independent and government forecasters had already predicted that the Treasury Department may not be able to pay the bills through mid-June, ramping up concerns of an economically devastating default early next month. The cash crush stems from a disappointing tax season, with tax receipts down in part because of filing delays granted to disaster-affected states.
Biden is projecting optimism amid the private debt limit negotiations, saying over the weekend that he thinks negotiators in both parties want to button down a bipartisan deal. The White House remains resistant to Republican efforts to cap federal spending for a decade, however, in addition to imposing tougher work requirements on certain benefit programs, like SNAP and Medicaid.
Democrats also maintain that those budget negotiations are happening separately from the debt limit, while Republicans contend that the two are inextricably linked. Senate Majority Leader Chuck Schumer stressed Monday that the discussions are happening on “parallel” tracks.
“We welcome a bipartisan debate about our nation’s fiscal future,” he said in a speech on the floor.
Yellen is scheduled to meet Thursday with major Wall Street leaders, who have warned for months that a debt default would be catastrophic for a fragile economy still at risk of recession amid persistent inflation and the Federal Reserve’s campaign to cool rising prices.
The independent Congressional Budget Office projected last week that Treasury could run out of money during the first two weeks in June, unless the department can stretch its bill-paying ability until the middle of the month.