WASHINGTON - The U.S. government will run out of money to meet all its payment obligations on June 5, if Congress does not raise the debt ceiling, Treasury Secretary Janet L. Yellen told lawmakers on Friday, providing a more precise forecast to lawmakers trying to break an impasse.

Her new projections came as lawmakers struggled to strike a deal that would raise the nation’s borrowing limit and hold spending down, which Republicans have said is necessary to get their support to raise the borrowing limit.

Yellen had previously told Congress that the United States could run out of funds in early June but “as soon as” June 1. Treasury’s new estimate provides more specificity on when the government will exhaust its funds.

“We now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5,” Yellen said in a letter.

President Biden and House Speaker Kevin McCarthy (R-Calif.) have reported progress in recent days on a government spending deal that would also lift the debt ceiling, but as of Friday afternoon no agreement had been made public and negotiators continued to face significant rifts.

Negotiators are closing in on an agreement that would raise the debt ceiling by two years — a key priority of the Biden administration — while also essentially freezing government spending on domestic programs and slightly increasing funding for the military and veterans affairs, said three people familiar with the matter who spoke on the condition of anonymity to reflect private deliberations. Although the deal is expected to include key GOP priorities, such as partially clawing back new funding for the Internal Revenue Service, a growing chorus of conservatives has balked at how little the deal appears to cut government spending overall — especially because it would also give up their party’s leverage on the debt ceiling until after the 2024 presidential election.

Exactly when the government will run out of money isn’t certain. Two prominent credit rating agencies warned that they could downgrade the U.S. government’s coveted AAA debt rating in the event of a default.

Even if negotiators do reach an agreement soon, they need time to put it into action. House rules require 72 hours for lawmakers to review legislation before a vote. The Senate would also have to act. All told, passage could take days. (Source: The Washington Post)

Story Date: May 27, 2023