U.S. Treasury Secretary Janet Yellen said the government could run out of money to pay all bills by June 5, giving lawmakers a few more days to reach a deal that would end the unprecedented debt deficit.
Yellen’s new estimate came Friday afternoon as the White House and House Republicans scramble to reach a deal on government spending that would lift the U.S. debt ceiling and remove a cloud of uncertainty over the nation’s economy.
Earlier, Yellen defaulted in 2010. He warned that it could happen by June 1. The latest update means there is a little more breathing room to work out the final details of the deal.
“Based on the most recent data available, we now estimate that the Treasury will not have sufficient resources to meet the government’s obligations unless Congress lifts or suspends the debt ceiling by June 5,” Yellen wrote in a letter to House Republican Kevin McCarthy. Speaker.
In the letter, Yellen said the Treasury could pay $130 billion in pension and government health care payments in the first two days of June, but these would “leave the Treasury at an extremely low level of resources.” In the week of June 5, she added, “Treasury’s projected resources are insufficient to meet its obligations.”
President Joe Biden and McCarthy’s negotiators met on Friday after edging closer to a deal that would raise the U.S. debt ceiling for two years while simultaneously setting limits on spending growth.
But he still wasn’t sure a deal could be made. Patrick McHenry, chairman of the House Financial Services Committee and one of the House Republicans’ lead negotiators, told reporters: “The more progress we make, the more difficult and challenging the remaining issues will be.” “At some point, this thing can come together – or go the other way.”
He added that it may still take “one or two or three” to reach an agreement.
McCarthy had a more upbeat tone when he arrived at the Capitol that morning.
“To do that, I will work as hard as we can to make more progress today and finish the journey.” I am completely optimistic. “It really comes down to one thing: this was about cost. Democrats never wanted to end the spending spree.
In an earlier CNN interview, U.S. Treasury Undersecretary Wally Adeyemo indicated that a deal was nearing: “I can say we are making progress and our goal is to make sure we get a deal because the default is unacceptable.”
He added: “The President has spoken, the Speaker has also spoken.” And we have to do something before the beginning of June, the Secretary General said, because there is a good chance that we won’t be able to pay our bills anymore.
IMF Managing Director Kristalina Georgieva warned on Friday that the US would be entering “uncharted territory” without a deal and would have to “reduce” spending.
Georgieva said that violating the deadline would affect confidence in treasury markets and risk “pulling the anchor” to provide stability to the international financial system.
“We’ve all read about fairy tales. Cinderella “Cinderella must leave the ball at exactly midnight,” she said. “And here we are. So before our carriage turns into a pumpkin, can we please sort this out?”
Once a deal is reached, any legislation could take several days to be passed by the Republican-controlled House of Representatives and the Democrat-controlled Senate before it can be signed into law by Biden.
The vote in the closely divided House will be especially difficult because both Republican and Democratic lawmakers have expressed displeasure over the deal.
In addition to setting spending limits for the next two years, the potential deal would include new work requirements for some Social Safety Net programs, legislation to accelerate major investments and less funding for the Internal Revenue Service to audit the wealthy. Tax payers.
If the deal is successful, it would remove major threats to the US economy and financial markets from instability in the banking sector and the impact of high interest rates on taming inflation.
Negotiations to resolve the fiscal crisis have kicked into high gear in recent weeks, forcing Biden to cut short a trip to Asia to attend talks in Washington. Although a deal was nearing, it was still uncertain whether it would be completed by the end of Friday, meaning the talks could be postponed over the Memorial Day long weekend in the United States.
U.S. stocks rose, with the S&P 500 up 1.3 percent, following reports of progress in debt ceiling talks. Treasury yields rose, mostly in response to better-than-expected economic data released in the morning.
Additional reporting by Peter Wells in New York