The U.S. government could be unable to pay all its bills on time if the debt limit isn’t raised or suspended by June 5, Treasury Secretary Janet L. Yellen said in a Friday afternoon letter.
Yellen updated Treasury’s estimate of when it will run out of cash and borrowing room to make payments in the letter to Speaker Kevin McCarthy. She had previously warned lawmakers that the department’s funds could run too low as soon as June 1, so the update offered slightly more breathing room as McCarthy and the White House work to negotiate a debt limit increase.
Yellen said Treasury will make more than $130 billion of scheduled payments — including Social Security, Medicare and veterans benefits — in the first two days of June, leaving the department with “an extremely low level of resources.” Treasury projects that it would then lack the resources to satisfy all of its obligations the week of June 5, which include an estimated $92 billion of payments and transfers.
Treasury also deployed another emergency tool on Thursday that it hadn’t used since 2015 because of its limited size, Yellen said, adding she will need to use all “extraordinary measures” available given Treasury’s low level of resources as the debt limit deadline draws near.
Yellen also warned Congress that last-minute action on the debt limit can harm business and consumer confidence, raise short-term borrowing costs and lead to downgrades of the United States’ credit rating while a failure to increase the debt limit in time would spur broader consequences.
“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 continue to urge Congress to protect the full faith and credit of the United States by acting as soon as possible.”
Treasury on Friday also updated its tally of remaining extraordinary measures, showing that $67 billion in accounting tools were still available. The agency’s emergency cash balance also dropped to just $39 billion as of Thursday.
McCarthy and House Republicans have said they’d only agree to a debt limit increase done alongside spending cuts and other policy changes. Proxies for McCarthy and President Joe Biden have been negotiating for days around a possible package that could increase the debt limit through the 2024 elections and cap discretionary spending for two fiscal years, among measures under consideration.