US may default on June 1 without debt ceiling hike; Biden, McCarthy to
meet
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[May 02, 2023]
By David Lawder, Trevor Hunnicutt, Andrea Shalal and David
Morgan
WASHINGTON (Reuters) - U.S. President Joe Biden on Monday summoned the
four top congressional leaders to the White House next week after the
Treasury warned the government could run short of cash to pay its bills
by June.
Treasury Secretary Janet Yellen said in a letter to Congress that the
agency will be unlikely to meet all U.S. government payment obligations
"potentially as early as June 1" without action by Congress.
The estimate raised the risk that the United States is headed for an
unprecedented default that would shake the global economy, adding new
urgency to political calculations in Washington, where Democrats and
Republicans were girding for a months-long standoff.
Biden called Republican House Speaker Kevin McCarthy in Jerusalem, where
he is on a diplomatic trip, to invite him to a May 9 White House
meeting. The two leaders haven't sat down to discuss the issue since
February.
Biden also extended invitations to House Democratic leader Hakeem
Jeffries, Senate Majority Leader Chuck Schumer and Republican leader
Mitch McConnell. McConnell, whose fall in March sidelined him for weeks,
said he and Biden had a "good conversation" today, adding: "I'm sure
we'll be speaking again."
![](http://archives.lincolndailynews.com/2023/May/02/images/ads/current/culligan_sda_SFARM_2023.png)
House Republicans passed a bill to raise the debt limit last week that
includes steep cuts to spending from healthcare for the poor to
air-traffic controllers, which the Democratic-controlled Senate and
Biden say they will not approve.
Biden has steadfastly said he will not negotiate over the debt ceiling
increase, but will discuss budget cuts after a new limit is passed.
Congress has often paired debt-ceiling increases with other budget and
spending measures.
A White House official said Biden, who had previously said he wouldn't
meet McCarthy at all to discuss the debt limit, would "stress that
Congress must take action to avoid default without conditions" on May 9.
The new potential "X-date," which takes in to account April tax
payments, is largely unchanged from a previous estimate, issued in
January, that the government could run short of cash around June 5. But
Yellen added some wiggle room, noting federal receipts and outlays are
"inherently variable." The actual date that Treasury exhausts
extraordinary measures "could be a number of weeks later than these
estimates," she wrote.
"It is impossible to predict with certainty the exact date when Treasury
will be unable to pay the government's bills," she wrote.
After hitting the $31.4 trillion borrowing cap on Jan. 19, Yellen
previously told Congress that Treasury would keep up payments on debt,
federal benefits and make other spending by using extraordinary cash
management measures. One such step Treasury is taking is suspending the
sales of securities that state and local governments use to temporarily
hold cash.
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![](../images/050223PIX/news_q99.jpg)
U.S. President Joe Biden talks with
House Speaker Kevin McCarthy (R-CA) as they depart following the
annual Friends of Ireland luncheon at the U.S. Capitol in
Washington, U.S., March 17, 2023. REUTERS/Evelyn Hockstein/File
Photo
![](http://archives.lincolndailynews.com/2023/May/02/images/ads/current/graue_lda_ENCOREpreowned_020723.jpg)
In 2011, a similar debt ceiling fight took the country to the brink
of default and prompted a downgrade of the country's top-notch
credit rating. This time, negotiations may be even more difficult,
veterans of 2011's face-off say.
SPENDING CUT DEMANDS
The April 26 bill passed by the Republican-led House would slash tax
incentives for solar energy and implement $4.5 trillion in spending
cuts - or about 22% - in exchange for a $1.5 trillion increase in
the U.S. debt limit.
The bill has no chance of passing the Democrat-controlled Senate and
the White House has said Biden would veto the legislation if it did.
Budget analyst Shai Akabas at the Bipartisan Policy Center said the
short deadline underscored the urgency of finding a solution to the
bitter standoff, and that it dashed hopes that the Congress could
negotiate through the late summer months.
A potential default within weeks "is not a position befitting of a
country considered the bedrock of the financial system, and only
adds uncertainty to an already shaky economy," he added.
BREATHING ROOM
Yellen's vagueness on the actual default date is due to some fiscal
events in June that could buy some breathing room.
If Treasury can make it past early June benefit payments, it could
take in significant cash from quarterly estimated tax payments due
on June 15, analysts say. Then Treasury could float until June 30,
when it would be able to tap $143 billion in borrowing by suspending
reinvestment of maturing securities held by the government
retirement funds.
![](http://archives.lincolndailynews.com/2023/May/02/images/ads/current/ldn_sda_KAREN_012823.png)
Along with tax receipts, that borrowing would allow it to pay bills
well into July.
Nonetheless, the U.S.'s debt ceiling battles are likely to persist
for years to come, with benefit programs like Social Security and
Medicare accounting for the largest category of the budget and
projected to grow dramatically as the population ages.
As the current debate heats up, Biden, who is seeking re-election in
2024, is using the House Republican proposal to tag his opposition
as an economic threat to local economies.
(Reporting by David Lawder, Trevor Hunnicutt, Andrea Shalal and
David Morgan in Washington; Editing by David Gregorio, Heather
Timmons, Matthew Lewis and Shri Navaratnam)
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