US Treasury Secretary Janet Yellen said the government could run out of money to pay all the bills by June 5, giving lawmakers a few more days of flexibility to strike a deal to prevent the fall unprecedented default.
Yellen’s new estimate, released Friday afternoon, comes as the White House and Republicans in the House rush to finalize a pact on government spending, paving the way for gender dismantling. loan term of the United States and remove the huge cloud of uncertainty that is enveloping the economy.
before Yellen warned of a possible default as early as June 1. The latest update means there is a little more room for the final details of the deal to be worked out.
“Based on the latest available data, we estimate that the Treasury Department will not have sufficient resources to meet government obligations if Congress does not increase or suspend the debt limit by June 5, Yellen wrote in a letter to Kevin McCarthySpeaker of the House of Representatives.
In the letter, Yellen said the Treasury could make $130 billion in government pension and healthcare-related payments to seniors in the first two days of June, but these “will leave back to the Ministry of Finance with extremely low levels of resources”. In the week of June 5, she added, “The Treasury Department’s projected resources will not be sufficient to meet” its obligations.
Presidential negotiators Joe Biden and McCarthy met again on Friday, after get closer to an agreement that would raise the borrowing limit for two years, until after the 2024 general election, and set limits that would limit spending growth over the same period.
Biden told reporters he was optimistic about the possibility of a deal. “I hope we’ll know tonight if we can come to an agreement,” he said.
But it’s still not certain that a compromise is possible. Patrick McHenry, chairman of the House Financial Services Committee and one of the top Republican negotiators in the House, told reporters: “Every time there is more progress, the issues remain. survival becomes more difficult and challenging. “At some point, this might come together – or go the other way.”
He added that it could still take “a day or two or three” to reach an agreement.
McCarthy was more optimistic when he arrived at the Capitol in the early morning.
“I will work as hard as I can to try to get this done, make more progress today and finish the journey. I’m a total optimist,” he said. “It really comes down to one thing: this is about spending. Democrats have never wanted to stop spending money.”
In an earlier CNN interview, Deputy Treasury Secretary Wally Adeyemo hinted that a deal is ready: “What I can say is we’re making progress and our goal is to make sure that we got a deal because default is unacceptable. ”
He added: “The President said it, and the Speaker said it. And we have to get something done before the beginning of June when the secretary says we most likely won’t have the resources to pay our bills.”
IMF Managing Director Kristalina Georgieva warned on Friday that if no deal is reached, the US will enter “uncharted territory” and face “cutting” in spending.
Georgieva says breaching deadlines will affect trust in treasury market and the risk of “pulling the anchor” bringing stability to the global financial system.
“We have all read the fairy tale about Cinderella “Cinderella has to leave the prom at midnight,” she said. “And here we are. So, before our carriage turns into a pumpkin, could we please arrange this?”
Once an agreement is reached, it could take days for any legislation passed by the Republican-controlled House and Democratic-controlled Senate, before it is enacted by Biden into law.
The vote in the tightly divided House of Representatives will be particularly difficult because of ratings and records Republic and Democratic lawmakers have expressed displeasure with the emerging agreement.
In addition to setting a spending cap for the next two years, a possible compromise could also involve new work requirements for some social safety net programs, the speeding law allows make large investments and boost smaller grants to the Internal Revenue Service to audit the wealthy. taxpayers.
An agreement, if successfully enacted, would remove a major source of risk to the US economy and financial markets, which are already grappling with uncertainties in the banking sector and the impact of interest rate hikes on the economy. overpower. inflationary.
Negotiations to resolve the financial crisis have only begun to pick up speed in recent weeks, forcing Biden to cut short his trip to Asia to follow the Washington talks live. While a deal is moving closer, it remains uncertain that it can be finalized by the end of Friday, meaning talks could drag into the long Memorial Day weekend in the US. .
Following reports of progress in debt ceiling negotiations, US stocks rallied, with the S&P 500 index closing 1.3% higher. Treasury yields rose, mainly due to stronger-than-expected economic data released in the morning.
Additional reporting by Peter Wells in New York