WASHINGTON — Finance Minister Janet Yellen said Friday the projected debt ceiling deadline was extended to June 5, four days later than previously estimated.
However, Yellen renewed her warning in a letter to Congress that a delay in raising the lending limit would “cause severe distress.”
Yellen's latest letter to legislators on the “X-date” comes as Congress breaks up for the long Memorial Day weekend. He said the Treasury Department had implemented extraordinary measures that had not been used since 2015 to get the US financial position to date.
The X-date arrives when the government no longer has enough financial cushion to pay all of its bills, having exhausted the measures it has used since January to stretch existing funds.
Early Friday, House Speaker Kevin McCarthy said his Republican and White House debt negotiators had hit a “difficult” time, trying to finalize a deal with President Joe Biden to curb federal spending and raise the nation's borrowing limit ahead of an impending deadline. .
They hoped to end weeks of frustrating talks and reach an agreement this weekend. The Treasury Department now says the government could start running out of cash as soon as a week from Monday, sending the US into a potentially disastrous default with a worldwide economic spillover.
Anxious retirees and social services groups were among those defaulting to contingency plans as lawmakers left town for the long holiday weekend. The next wave of Social Security checks is due out next week.
“The world is watching,” International Monetary Fund Managing Director Kristalina Georgieva said after meeting Friday with Yellen. “Let's remember we are now at the 12th hour.”
The Democrat Biden and the Republican speaker narrowed differences, seeking to lock down the details of a two-year agreement that would restrain federal spending and lift the legal lending limit past next year's presidential election.
Any deal would have to be a political compromise, with support from Democrats and Republicans to pass a divided Congress.
“We know this is a crisis,” McCarthy said as he arrived at the empty Capitol, acknowledging more progress needed to be made.
In remarks at the White House in honor of Louisiana State University's champion women's basketball team, Biden yelled at one of these top negotiators saying he “laid out a deal, hopefully.”
He referred to Office of Management and Budget Director Shalanda Young who attended the event as did Rep. Garret Graves of Louisiana, a prominent Republican negotiator.
While the contours of the deal have been formed to cut spending for 2024 and impose a 1% cap on spending growth for 2025, the two sides remain stick to the odds. The debt ceiling, now at $31 trillion, will be lifted over two years to pay the country's bills as they arise.
A person familiar with the talks said both sides were “digging in” whether or not to agree to Republican demands to impose stricter work conditions on people who receive government food stamps, cash transfers and health care assistance.
House Democrats called such a requirement for health care and food assistance a nonstarter.
Asked whether Republicans would cave to Graves' job terms, furious: “No, not a chance.”
House Republicans have pushed the issue over the edge, showing risky political courage by leaving town for the Memorial Day holiday. Lawmakers are temporarily not expected to return to work until Tuesday, just two days from the “X-date” of June 1, when Treasury Secretary Yellen said the US could face a default.
Biden will also be away this weekend, leaving Friday for the president's retreat in Camp David, Maryland, and Sunday for his home in Wilmington, Delaware. The Senate is on break and will return after Memorial Day.
“Each time there is progress forward, the remaining issues become more difficult and more challenging,” said negotiator Rep. Patrick McHenry, RN.C., at noon Friday.
Weeks of negotiations between Republicans and the White House have failed to produce a deal — in part because the Biden administration refused to negotiate with McCarthy on a debt limit, arguing that the country's full trust and credit should not be used as leverage to extract other partisan priorities.
“We have to spend less than we spent last year. That's the starting point,” said McCarthy.
One idea is to set a top-line budget figure but then add a “snap-back” provision to enforce cuts if Congress is unable during the annual appropriations process to meet the new goal.
Regarding job requirements for beneficiaries, the White House specifically rejected steps that could push more people into poverty or take away their health care, said a person familiar with the talks, who declined to be identified to describe the discussions as closed.
Upon Republican requests to cancel money for the Internal Revenue Service, it remains an “open matter” whether parties will compromise by allowing funds to be pushed to other domestic programs, the person said.
In one potential development, Republicans may reduce their demand for increased defense spending beyond what Biden has proposed in his budget, instead offering to keep it at his proposed level, according to another person familiar with the talks.
The team is also seeking proposals to encourage the development of energy transmission lines from Senator John Hickenlooper, D-Colo., to facilitate the construction of inter-regional power grids.
Meanwhile, McCarthy is feeling pressure from the right wing of the House not to give up on any deal, even if it means missing the June 1 deadline.
“Let's wait,” said Rep. Chip Roy, R-Texas, member of the Freedom Caucus.
McCarthy said Donald Trump, a former president who was running for office again, told him, “Make sure you get a good deal.”
However, wary Democrats are also pressing Biden. The three House Democratic leaders led by Rep. Hakeem Jeffries spoke Thursday night with the White House.
Even if negotiators strike a deal in the coming days, McCarthy has promised lawmakers he will abide by the rules for posting any bills for 72 hours before the vote – now possibly Tuesday or even Wednesday. The Democratic-controlled Senate has vowed to move quickly to get the package to Biden's desk, just before next Thursday's deadline.
Meanwhile, Fitch Ratings put the United States' AAA credit on “rating watch negative,” warning of a possible downgrade.
The White House continues to argue that the deficit can be reduced by ending tax breaks for wealthier households and some companies, but McCarthy said he told the president at their February meeting that increasing revenue from tax increases was out of the question.
While Biden has ruled out, for now, invoking the 14th Amendment to raise his own debt limit, Democrats in the House announced that they had all entered into a legislative “waiver” process that would force a debt ceiling vote. But they need five Republicans to break with their party and tip the majority to advance the plan.
They will all be sure to get back some $30 billion of unused COVID-19 funds now that the pandemic emergency has been officially lifted.