By June 5, the U.S. will be unable to pay its payments on time, according to United States Treasury Secretary Janet L. Yellen.
“We now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5,” Ms Yellen said in a letter to House Speaker Kevin McCarthy.
Negotiators now have more time to come to an agreement on raising or suspending the nation’s debt ceiling following the update by Ms Yellen.
The Treasury Secretary has previously said that by June 1 the United States might not have enough cash to pay its bills.
Ms Yellen’s letter gave the most exact date for when the United States is anticipated to run out of money.
The secretary’s disclosure comes as the White House and House Republicans race to strike a deal that would raise the country’s $31.4 trillion borrowing ceiling and stop the United States from defaulting on its debt. On January 19, the Treasury Department reached the statutory debt ceiling. Since then, “extraordinary measures” have been taken in the form of accounting tricks to make sure the U.S. can continue making on-time payments to its creditors.
The severe financial condition that Treasury is in is made evident in Ms Yellen’s letter to Congress, which does offer a modest bit of flexibility. Over $130 billion in scheduled payments from the federal government are due over the first two days of June, including money for veterans, social security recipients, and medicare beneficiaries.
As a result of those payments, the Treasury Department will have “an extremely low level of resources.”
“Our projected resources would be inadequate to satisfy all of these obligations,” Ms Yellen in the letter said.
Republican congressman from North Carolina Patrick McHenry, a major figure in the negotiations, claimed that the Treasury Department’s more exact timetable puts extra pressure on the negotiators.
Mr McHenry said that he was aware of how little time was left to avert a default even before the letter.
“We’ve got to be in the closing hours because of the timeline. I don’t know if it’s in the next day or two or three, but it’s got to come together,” he said.
Ms Yellen has been alerting Congress for months that the U.S. may not have enough money in early June to cover all of its obligations.
Earlier this week, the Treasury secretary promised to make an effort to be more specific in her future updates regarding the potential timing of default. Republicans in the House have demanded that the Treasury secretary testify before Congress and give her whole analysis because they don’t believe that a default could be on the horizon so soon.
The debt ceiling, also known as the debt limit, is a cap on the total sum of money that the federal government is permitted to borrow through the U.S. Treasury securities, such as bills and savings bonds, to meet its financial obligations. The United States must borrow an enormous amount of money in order to pay its debts because it has a budget deficit.
