by WASHINGTON – The US has four extra days to avoid defaulting on its debts.
Treasury Secretary Janet Yellen gave an updated timeline on Friday for when the government could run out of money, saying her projection is now by June 5 based on the most recent data if Congress doesn’t raise or suspend the debt ceiling.
Yellen had previously said the US is on track to default in early June and “as early as June 1”, leading White House and Republican negotiators to target a deal on the first of the month.
The more accurate projection, outlined in a letter to House Speaker Kevin McCarthy, gives President Joe Biden and McCarthy additional time to strike a deal to raise the debt ceiling and avoid bankruptcy as they head into Memorial Day weekend.
The two sides are approaching a new deal to raise the debt ceiling through 2024 and meet Republican demands for spending cuts. But they still have disagreements over expanded work requirements for welfare programs and expedited permitting for oil and gas projects.
Before leaving the White House Friday night for the presidential retreat at Camp David, Biden told reporters “things are looking good” and hopes to have “some clear evidence tonight before the clock strikes 12” that a deal has been finalized.
“It’s very close and I’m optimistic,” Biden said.
Yellen said the Treasury will make more than $130 billion in scheduled payments in the first two days of June, including payments to veterans and Social Security and Medicare recipients, leaving the department with “an extremely low level of resources.”
She said the government balance would be insufficient to meet an estimated $92 billion in payments and transfers, including a planned investment in Social Security and Medicare trust funds of about $36 billion.
As a result of the debt ceiling deadlock, Yellen said the Treasury has already seen a significant increase in borrowing costs for securities maturing in early June.
The rating agency Fitch on Wednesday put the country’s “AAA” rating on a negative hold, anticipating possible Congressional inaction to raise the debt ceiling.
Yellen urged Congress to take action, saying a default would “cause serious hardship for American families, damage our global leadership position and raise questions about our ability to defend our national security interests.”
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Biden, McCarthy closer to a deal, but still not there
White House negotiators and House Republicans have nearly struck a deal to cap annual discretionary spending for the next two years, effectively keeping spending levels the same for many domestic programs. McCarthy has said Republicans want next fiscal year’s budget to be smaller than last year’s.
In another concession to the Republicans, a deal in the making would reverse $10 billion of $80 billion in IRS funding approved last year in Biden’s Inflation Reduction Act that was intended to crack down on wealthy Americans and companies that evade taxes.
Even with the extra four days, each deal faces a complicated path to passage. Members of Congress will return from Memorial Day long weekend on Tuesday. McCarthy also told Republicans he will follow a rule that gives members 72 hours to read a bill before voting.
It’s unclear if a deal will get the votes in Congress for approval, even if it has the backing of Biden and McCarthy.
Rep. Patrick McHenry, RN.C., a leading Republican negotiator, said the potential default date of June 5 “puts additional pressure on us” and “enforces and ensures” the urgency of reaching an agreement.
“The deal is within reach, it just needs to be agreed upon, and we are waiting for the White House to understand the current terms,” McHenry said.
Yellen warned of the June 5 date in a January letter to McCarthy
This isn’t the first time Yellen has referenced a June 5 date.
The Treasury Secretary sent a letter to McCarthy, R-Calif., earlier this year, warning that a “debt issuance suspension period” could last until June 5 before the Treasury exceeds the debt limit.
The Treasury Department announced in January that it would take “extraordinary measures” to prevent the country from defaulting on its debt obligations after the federal government hit its $31.8 trillion borrowing limit.
“The period that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors, including the challenges of forecasting payments and receipts from the US government months in the future,” Yellen wrote in January.
More: The US Treasury Department is taking “extraordinary measures” as the government approaches the debt ceiling
Reach Joey Garrison on Twitter @joeygarrison.
This article originally appeared on USA TODAY: Yellen extends timeline for impending bankruptcy by 4 days to June 5
