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 was sometime in July or even 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 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. Sen. Shelley Moore Capito (R-WV), a member of 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 ceiling passes either chamber of Congress.
“We'll find out how serious of a deadline it is. But it reinforces the need for the president to get up here," Senate Minority Whip John Thune (R-SD) told reporters. "I mean, time’s a wasting.”
House Budget Committee ranking member Brendan Boyle (D-PA) responded to the letter by reiterating his call for Republicans to lift the debt ceiling without conditions.
"I implore my Republican colleagues to stand up against the dangerous and misguided pro-default mentality that is festering within their caucus and to instead work with Democrats and pass a clean bill so we can move forward," he said in a statement.
Lawmakers will only have a handful of days to act to meet the Treasury deadline. Both chambers are only in session eight days 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."