Lawmakers have until June 1 to raise the nation’s debt ceiling, Treasury Secretary Janet Yellen wrote in a letter to congressional leaders on Monday.
Yellen told lawmakers she expects the U.S. to no longer be able to pay all of its outstanding obligations by as early as June 1, ramping up pressure on Congress and the White House to come to an agreement.
Yellen initially told lawmakers it was unlikely the federal government would exhaust the so-called extraordinary measures it has been using to continue paying its bills before early June. But now, citing recent tax revenues, Yellen said the deadline is expected to come sooner than expected.
The Congressional Budget Office (CBO), Congress’s chief nonpartisan budget scorekeeper, also warned on Monday there is “significantly greater risk that the Treasury will run out of funds in early June,” citing lower-than-expected revenue in April.
“We now know that receipts from income tax payments processed in April were less than we anticipated in our latest baseline budget projections,” CBO chief Phillip Swagel said on Monday. “Moreover, we expect that the Internal Revenue Service (IRS) — after several years of disruptions resulting from the coronavirus pandemic — will finish processing tax returns more rapidly than it did last year.”
“As a result, we anticipate that the IRS will process relatively few additional payments in May, as it did in the years before the pandemic,” he added. “That, in combination with less-than-expected receipts through April, means that the Treasury’s extraordinary measures will be exhausted sooner than we previously projected.”
The timetable gives lawmakers precious little time to work out the mechanics of a deal, and lawmakers wasted no time pointing the finger at the other party.
“Time’s a-wasting. Let’s get this figured out,” Sen. Jon Tester (D-Mont.) told reporters on Monday shortly after the news broke.
President Biden and Democrats are demanding that House Republicans raise the debt ceiling as part of a “clean” piece of legislation, while the GOP wants any hike in the borrowing limit tied to spending cuts.
Rep. Brendan Boyle (D-Pa.), the top Democrat on the House Budget Committee, said in a statement on Monday that the development “needs to be a wake-up call for Speaker McCarthy,” while taking aim at a partisan plan Republicans passed last week to raise the debt ceiling.
Republicans, meanwhile, put the onus on Biden.
“We knew it was coming,” Sen. John Cornyn (R-Texas) said. “We just didn’t know exactly when it was. But that provides a little more information for President Biden to get off the couch and talk to Speaker McCarthy and work something out.”
Sen. Shelley Moore Capito (R-W.Va.) expressed surprise with the timeline but said the development puts pressure on the White House to come to the bargaining table with McCarthy.
“The president’s the leader; he needs to engage,” she said, while adding she thinks Yellen is “carrying his water.”
The House Republicans’ bill would raise the debt ceiling by $1.5 trillion or through the end of next March, whichever happens first, in exchange for a wide range of Republican proposals to decrease government spending that have prompted staunch opposition from Democrats.
That includes pitches to cap government funding hashed out by lawmakers as part of the annual appropriations process to fiscal 2022 levels, while also limiting spending growth to 1 percent every year for the next decade.
Other proposals featured in the bill would impose tougher work requirements for programs, like Medicaid and Supplemental Nutrition Assistance Program (SNAP), and put an end to popular student loan actions implemented under the Biden administration.
Republicans also cast doubt on the chances of a “clean” debt ceiling measure currently making it out of Congress, including the Senate, as both sides did in their heels.
“Won’t pass the House. Won’t pass the Senate,” Cornyn said.
Sen. Brian Schatz (D-Hawaii) called for Democrats to hold the line in pressing for a clean debt ceiling increase, saying “there’s no deal to cut here.”
“The premise here is that there should be no policy concession in exchange for preventing default, and that no political party ever should threaten to collapse the American economy just to enact their policy prescriptions,” he said.
“This is not just abnormal but reckless. To take the American economy hostage cannot be tolerated and the only thing scarier than not negotiating with these people is negotiating with them because they will never ever stop holding Americans and the American economy hostage,” he added.
Updated at 5:31 p.m.