The United States faces a ‘high risk’ of running out of money to pay bills between June 2 and June 13 if Congress does not raise or suspend the national debt ceiling, according to a published analysis Tuesday by the Bipartisan Policy Center, an influential think tank that closely tracks federal spending.
The analysis points to the growing possibility that the United States will default on its debt as early as next week. It comes amid negotiations between the White House and Republicans in Congress to reach a deal that would also lift the $31.4 trillion borrowing limit.
“Come early June, the Treasury will be skating on very thin ice that will only get thinner with each passing day,” said Shai Akabas, the center’s director of economic policy. “Of course, the problem with thin ice skating is that sometimes you fall through.”
The center said the Treasury Department would be operating with “dangerously low” cash reserves after Memorial Day and that each day in June would carry increasing risk. The department has used accounting maneuvers known as extraordinary measures to delay a default since the United States technically hit the debt ceiling in January, but those are expected to run out soon.
The center noted that the federal government could get a reprieve if it could muster enough revenue to do so until June 15, when quarterly tax payments are due. This could push back a default, the so-called X date, to July.
However, Treasury Secretary Janet L. Yellen said this week that she thinks the federal government is unlikely to have enough cash to go to mid-June.
In a letter to Congress on Monday, Yellen reiterated her estimate that Date X could arrive as early as June 1. His warning was not accompanied by caveats included in his previous updates, which had suggested government cash reserves could last a few more weeks. Instead, she emphasized the urgency of the situation.
“If Congress fails to raise the debt ceiling, it would cause serious hardship for American families, harm our position as a global leader, and raise questions about our ability to advance our national security interests,” Ms. Yelen.
As Date X approached, the Treasury Department checked with federal agencies on the upcoming spending schedule. The Treasury recently sent a memo to the agencies asking if any scheduled payments might be delayed. The Washington Post reported earlier on the memo.
The communication is similar to what the Treasury Department conveyed during the 2021 debt ceiling standoff and is part of how it manages its cash reserves.
“To produce an accurate forecast around the debt limit, it is essential that the Treasury has up-to-date information on the magnitude and timing of agency payments,” said Lily Adams, spokeswoman for the Treasury. “As in previous episodes of debt restraint, the Treasury will continue to communicate regularly with all aspects of the federal government on their planned spending.”