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Treasury says U.S. will hit the debt limit 'as early as June 1,' sooner than expected

Treasury Secretary Janet Yellen told Congress the deadline "could be a number of weeks later." The narrowing window puts new pressure on lawmakers.
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WASHINGTON — Treasury Secretary Janet Yellen said Monday that the deadline to extend the debt ceiling or face the first U.S. default could be as early as June 1, adjusting the timeline as the path to avert a self-inflicted crisis remains murky on Capitol Hill.

“After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time," Yellen wrote in a letter to Congress.

But Yellen emphasized the uncertainty surrounding the issue and said the deadline could slide to "a number of weeks later."

"This estimate is based on currently available data, as federal receipts and outlays are inherently variable, and the actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates," she wrote.

The new cutoff window gives Congress a narrower timeline to hammer out a solution after Yellen previously said the deadline was June 5. It is common for the Treasury Department to adjust the “X date” for when money runs out, based on tax collections that fluctuate and can be hard to predict. The new date announced Monday is also expected to be updated as the deadline nears.

The U.S. hit the statutory borrowing limit in January and has been using "extraordinary measures" to pay the bills. Some outside experts — and members of Congress — had expected a longer window before the true deadline.

The Republican-controlled House remains at odds with the Democratic-led Senate and President Joe Biden about the way forward. There are just 31 calendar days before the deadline, and the Senate is in session for just 15 of them, while the House is scheduled to be working for just 12.

“Republicans’ failure to agree to cleanly raise the debt ceiling has brought the United States to the brink of economic catastrophe,” Sen. Sheldon Whitehouse, D-R.I., the chair of the Budget Committee, said in a statement. “Today, we learned that we are potentially within a month of a self-inflicted economic shock that could dwarf the Great Recession, and Republicans are holding our economy hostage, adding to economic instability.”

House Speaker Kevin McCarthy, R-Calif., recently passed a party-line bill to extend the debt limit for one year while rolling back parts of Biden's clean energy agenda and imposing a series of unspecified spending cuts. But Senate Majority Leader Chuck Schumer, D-N.Y., has blasted that bill as a path to default, and he has vowed to hold hearings highlighting "the damage" it would do.

The House GOP-led bill calls for slashing discretionary spending to fiscal 2022 levels and imposing a 1% growth cap for the next decade. Many Republicans say they don't want to reduce military spending, which means their proposed cuts would target the 15% of the budget that includes funding for education, job training, air travel and rail safety, law enforcement and veterans' benefits.

Democrats argue that if it is implemented, the GOP bill would force cuts to the Veterans Affairs Department. Republican leaders say the legislation wouldn't necessitate that, although they haven't detailed what programs they would cut or eliminate.

"It is impossible to predict with certainty the exact date when Treasury will be unable to pay the government’s bills, and I will continue to update Congress in the coming weeks as more information becomes available," Yellen wrote Monday. "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."