WASHINGTON — Treasury Secretary Janet L. Yellen said on Monday that the United States could be unable to pay its bills by June 1 if Congress does not raise or suspend the debt limit, putting pressure on President Biden and lawmakers to reach an agreement to avoid a default.
The warning over when the United States will hit the so-called X-date provides new urgency for Democrats and Republicans to find a way to lift the borrowing cap and break a standoff that threatens to rock financial markets and upend the economy.
“Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments,” Ms. Yellen said.
House Republicans passed legislation in April that would raise the debt limit in exchange for deep spending cuts and roll back recent legislation that Democrats passed along party lines. Mr. Biden has blasted that bill, saying it would hurt working families while benefiting the oil and gas industry, and he has accused Republicans of putting America’s economy on the line.
Still, with time running out and some moderate Democrats also calling for spending restraint, Mr. Biden is expected to meet with Speaker Kevin McCarthy, a California Republican, and other congressional leaders from both parties in the coming weeks.
The United States technically hit its $31.4 trillion debt limit in January, forcing the Treasury Department to employ accounting maneuvers known as extraordinary measures to allow the government to keep paying its bills, including payments to bondholders who own government debt. Ms. Yellen said at the time that her powers to delay a default — in which the United States fails to make its payments on time — could be exhausted by early June. She cautioned, however, that the estimate came with considerable uncertainty.
Although he plans to meet with Mr. McCarthy, Mr. Biden has insisted that raising the debt limit is not negotiable and urged Republicans to do so without strings attached.
“The most important thing we have to do in that regard is to make sure the threat by the speaker of the House to default on the national debt is off the table,” Mr. Biden said in remarks at the White House on Monday. “For over 200 years, America has never, ever, ever failed to pay its debt.”
A Treasury Department official said the government had a cash balance of about $300 billion at the end of April. Ms. Yellen’s ability to delay a default will depend in part on how much tax revenue comes into the federal government this spring.
Tax day payments are still arriving. Goldman Sachs economists projected last week that by the second week of June, the Treasury Department could have about $60 billion of cash remaining, which would allow the government to keep making its payments until late July.
Some budget analysts have suggested that winter storms could complicate the Treasury Department’s ability to delay a default. Severe storms, flooding and mudslides in California, Alabama and Georgia this year prompted the Internal Revenue Service to push the April 18 filing deadline to October for dozens of counties.
The I.R.S. also gave those affected areas more time to make contributions to retirement and health savings accounts, potentially affecting their taxable income.
Ms. Yellen has already been taking steps to ensure that the federal government has sufficient cash on hand.
Earlier this year, she announced that she would redeem some existing investments and suspend new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.
On Monday, Ms. Yellen said the Treasury Department was suspending the issuance of State and Local Government Series Treasury securities.
Brinkmanship over the debt limit has revived debates over how far the executive branch can go to avoid a default. Ms. Yellen, however, has dismissed the notion that she could prioritize certain payments or mint a platinum coin worth $1 trillion to ensure that the United States remains solvent.
In a speech last week, Ms. Yellen warned that a default would have real consequences for the economy.
“Household payments on mortgages, auto loans and credit cards would rise,” Ms. Yellen said in remarks to the Sacramento Metropolitan Chamber of Commerce. “And American businesses would see credit markets deteriorate.”
She added, “On top of that, it is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security.”
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