On Monday, the Treasury Department told lawmakers that if they don’t do something to raise or stop the debt limit, the country won’t be able to pay its bills by June 1.
In a message to House Speaker Kevin McCarthy (R-CA), Treasury Secretary Janet Yellen urged Congress to end the current standoff over the government borrowing limit. She warned that waiting until the last minute could hurt the economy and the country’s credit rating.
In January, Yellen told Congress that the US had hit its debt ceiling of $31.4 trillion and that the Treasury Department would take “extraordinary measures” to buy time for Congress to act. Since then, the agency has gathered the tax returns of millions of Americans. This has helped the Treasury know when it won’t be able to pay its bills.
“After looking at recent federal tax receipts, our best guess is that we won’t be able to keep paying all of the government’s bills by early June, and possibly as early as June 1, if Congress doesn’t raise or suspend the debt limit before then,” she said.
Even though Yellen said the date could be “a number of weeks later” than June 1, this will put more pressure on Washington to reach a deal on the debt limit. Before, financial experts thought the so-called “X-date” for lawmakers to raise the borrowing cap would be in July or even September.
Last week, Republicans in the House passed a bill to raise the debt ceiling in an effort to get President Joe Biden to the talking table. However, Biden has not yet called McCarthy to set up a meeting.
On Monday, Biden called the “Big Four” congressional leaders to suggest a meeting on May 9 at the White House.
McCarthy wants spending cuts in return for a rise in the amount the government can borrow, but Democrats won’t pass anything but a straight increase. Democrats have called the House bill, which would cut $4.8 trillion over 10 years and undo many of Biden’s legislative achievements, a “ransom note.”
Lawmakers participated in common posturing following Yellen’s letter. Sen. Shelley Moore Capito (R-WV), a member of the Republican leadership in the Senate, told reporters that Yellen is “carrying water” for the president by announcing the earlier date, while Sen. John Cornyn (R-TX) said there’s no way a clean debt cap passes either house of Congress.
“We’ll see how important the date is. “But it shows how important it is for the president to be here,” said John Thune, a Republican in the Senate from South Dakota. “I mean, time’s wasting.”
In response to the letter, the senior member of the House Budget Committee, Brendan Boyle (D-PA), again asked Republicans to raise the debt ceiling without any terms.
In a statement, he said, “I urge my Republican colleagues to stand up to the dangerous and misguided pro-default mentality that is growing in their caucus and instead work with Democrats to pass a clean bill so we can move forward.”
To meet the Treasury limit, lawmakers will only have a few days to act. Both houses of Congress won’t meet again until June 1.
In her message, Yellen said that her department would take another step to avoid default: they would stop giving out state and local government series Treasury notes, which count against the borrowing limit.
“Treasury will do this to manage the risks that come with the debt limit, but it won’t be free. State and local governments will lose an important tool that helps them manage their finances,” she said.
At the end of her letter, Yellen asked lawmakers to do something quickly to end the standoff.
“If Congress doesn’t raise the debt limit, it would be very hard on American families, hurt our ability to lead in the world, and make people wonder if we can protect our national security interests,” she said. “I kindly ask Congress to act as soon as possible to protect the full faith and credit of the United States.”