Treasury Secretary Janet Yellen has shifted the date the country could default to June 5, giving House Speaker Kevin McCarthy (R-CA) and the White House a few extra days of breathing room as the two inch closer to a deal to raise the debt limit.
Yellen had previously informed Congress the United States could be unable to pay all of its bills as soon as June 1, but with the caveat that her estimate was imprecise. She told McCarthy in a letter Friday that the “most recent data available” has led her to revise that date slightly.
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Even a few days could give negotiators major breathing room with less than a week left to meet the original deadline. The two sides have yet to reach an agreement, though one of McCarthy’s deputies, Rep. Patrick McHenry (R-NC), told reporters Friday that talks are delicate but making progress.
Once a deal is inked, Congress will still need to turn that agreement into legislative text, which could take a day or two. From there, McCarthy has promised that lawmakers will get 72 hours to review the bill before it’s passed through the lower chamber. The bigger hurdle will be the Senate, where a single senator can slow down but not halt the legislation’s passage.
Sen. Mike Lee (R-UT), a member of the fiscally conservative “Breakfast Club,” has already signaled that he will oppose the bill if it does not include deep spending cuts.
The emerging deal would cap spending for two years in exchange for a $4 trillion hike in the debt ceiling, marking a concession from Democrats that nonetheless falls far short of GOP demands.
Negotiators also see room for energy permitting reform to be included in the agreement, while another GOP demand, work requirements for government benefits, has become a major sticking point in budget talks.
House conservatives have panned Yellen’s June deadline as a “political fiction,” demanding that she show how she arrived at her date. She is set to appear before Congress on June 7, after the “X-date,” to brief lawmakers on the Treasury Department’s calculations.
McHenry responded to the letter with appreciation, calling Yellen a “woman of principle” who is “faithful to the law.”
He addressed the GOP complaints against her directly, saying, “There was some skepticism of a date range and you can pick whatever you want it to be and everything else. That is not how this works.”
Her agency hit the statutory $31.4 trillion debt limit on Jan. 19 and has been deploying “extraordinary measures” ever since to stave off default.
Yellen informed Congress on Friday that the Treasury will be left with an “extremely low level of resources” after it makes $130 billion in payments in the first two days of June. The department would then be unable to meet all of its obligations the week of June 5, when $92 billion is scheduled to be transferred or paid.
She concluded her letter with a familiar warning that failing to meet the country’s obligations could have adverse consequences, including the nation’s credit rating.
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Fitch, one of the top credit ratings agencies, threatened on Wednesday to downgrade the U.S.’s “AAA” standing if the debt ceiling standoff is not resolved promptly.
“I continue to urge Congress to protect the full faith and credit of the United States by acting as soon as possible,” Yellen wrote.
Reese Gorman contributed to this report.
