The Treasury Department warned lawmakers on Monday that without congressional action to lift or suspend the debt limit, the country will be unable to pay its obligations as soon as June 1.
In a letter to House Speaker Kevin McCarthy (R-CA), Treasury Secretary Janet Yellen urged Congress to resolve the current brinkmanship over the federal borrowing limit, warning that waiting until the last minute could have adverse impacts on the economy and the nation’s credit rating.
DEMOCRATS TRY TO MAINTAIN UNITED FRONT AS GOP DEBT LIMIT PLAN ADVANCES
Yellen had previously warned Congress in January that the United States had reached its $31.4 trillion debt limit and that the Treasury Department would take “extraordinary measures” to buy time for Congress to act. Since then, the agency has collected the tax filings of millions of Americans, allowing the Treasury to better predict when it will be unable to pay its bills.
“After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” she said.
While Yellen acknowledged that the date could be “a number of weeks later” than June 1, the time frame will put renewed pressure on Washington to come to an agreement over the debt ceiling. Financial analysts had previously predicted the so-called “X-date” for lawmakers to lift the borrowing limit could be as late as September.
House Republicans passed a debt ceiling bill last week in a bid to bring President Joe Biden to the negotiating table, but the president had yet to call McCarthy to schedule a meeting.
That changed on Monday afternoon when Biden called the “Big Four” congressional leaders to propose a May 9 meeting at the White House.
McCarthy is demanding spending cuts in exchange for a hike in the borrowing limit, while Democrats refuse to pass anything other than a clean hike. Democrats have denounced the House bill, which would cut $4.8 trillion over a decade and roll back many of Biden’s legislative accomplishments, as a “ransom note.”
Lawmakers engaged in familiar posturing following Yellen’s letter. McCarthy, who is on a trip to Israel this week while the House is out of session, said the president “has refused to do his job — threatening to bumble our nation into its first-ever default.”
“There is a bill sitting in the Senate as we speak that would put the risk of default to rest. The Senate and the president need to get to work — and soon,” he added.
Meanwhile, Congress’s top two Democrats, House Minority Leader Hakeem Jeffries (D-NY) and Senate Majority Leader Chuck Schumer (D-NY), reiterated their call for a clean debt ceiling increase.
“Republicans cannot allow right-wing extremism to hold our nation hostage,” they said in a statement. “For generations, Congress has made spending and revenue decisions as part of the annual budget process, which is currently underway. That is the appropriate place to debate and discuss our nation’s fiscal picture — not in a hostage-situation in which extreme MAGA Republicans try to impose their radical agenda on America.”
Senate Minority Leader Mitch McConnell (R-KY) acknowledged the call from Biden but declined to say whether he would attend the May 9 meeting.
“We had a good conversation this afternoon. And I’m sure we’ll be speaking again,” he told reporters.
Lawmakers will have a short window to act to meet the Treasury deadline. There are just eight days when both chambers are in session before June 1.
In her letter, Yellen noted that her department would be taking an additional step to avoid default: suspending the issuance of state and local government series Treasury securities, which count against the borrowing limit.
“Treasury will take this action to manage the risks associated with the debt limit, but it is not without costs, as it will deprive state and local governments of an important tool to manage their finances,” she said.
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Yellen concluded her letter with a call for lawmakers to act quickly to resolve the standoff.
“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,” she said. “I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible.”
