Congress will need to raise the debt limit by early June, Treasury Secretary Janet L. Yellen said in a letter to congressional leaders Monday, noting that action may even be needed before June 1.
After that date, the Treasury Department estimates there’s a real risk of running out of cash and accounting maneuvers to continue paying bondholders and other U.S. financial obligations on time.
Outstanding U.S. debt already reached the statutory $31.4 trillion borrowing limit in January, and Treasury has been using “extraordinary measures” since then to keep spending without breaching the cap. At the time Treasury began deploying those accounting tools, Yellen said how long they would last was subject to “considerable uncertainty.”
Her update to Congress on Monday provides some more certainty based on tax receipts that came in during the filing season that ended April 18. But Yellen still cautioned that the “actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates.”
The House took action last week to raise the debt limit into next year, passing a bill that would pair a $1.5 trillion increase with nearly $4.8 trillion in deficit reduction provisions. The legislation narrowly passed, 217-215, with only Republican support, and the Senate does not plan to take it up.
Speaker Kevin McCarthy, R-Calif., has called for bipartisan negotiations, but so far President Joe Biden and top congressional Democrats have declined.
Democrats say they will not consider preconditions for raising the debt limit and are insisting on a “clean” bill, but Republicans have said that won’t pass the House.