Biden seeks debt meeting with Hill leaders as Treasury warns of June 1 breach
The latest estimate piles new pressure on Congress and the White House, severely shortening the estimated timeframe before the nation hits its borrowing limit.
President Joe Biden invited Congress’ top four leaders in both parties to a May 9 meeting after the Treasury Department delivered a stark Monday warning: The nation could hit its existing debt ceiling as soon as June 1.
Biden called Hill leaders following Treasury Secretary Janet Yellen’s warning that the U.S. could default on its $31.4 trillion in debt in as little as 30 days. Yellen’s stunning forecast piles new pressure on Hill leaders and the White House to strike a bipartisan fiscal deal as cross-party talks remain deadlocked.
While the secretary’s letter was sent after markets closed on Wall Street, the prediction landed hard on the Hill, where lawmakers hoped they’d have months to maneuver past the current impasse between Biden and Speaker Kevin McCarthy. Now, they could have only a few weeks before a potential economic catastrophe.
On Monday night, Senate Majority Leader Chuck Schumer teed up two pieces of legislation: the debt-limit bill House Republicans passed last week that includes significant spending cuts and one that would suspend the debt limit through the 2024 election with no strings attached. While his actions don’t guarantee a floor vote on either, a Schumer spokesperson said “this process will ensure that once a clean debt ceiling is passed, the House bill is available for a bipartisan agreement” on spending and taxes “as part of the regular budget process.”
Biden’s invite included Schumer, McCarthy, House Minority Leader Hakeem Jeffries and Senate Minority Leader Mitch McConnell. The president’s calls were first reported by The Washington Post.
Senate Republicans praised the president for heeding calls that he meet with McCarthy, insisting that it’s time for the White House to get serious about haggling over fiscal concessions after House Republicans narrowly passed their proposal last week to make substantial cuts to government spending in exchange for staving off default.
“Joe Biden better get his butt in gear and start getting serious about it,” said Sen. Kevin Cramer (R-N.D.). “He’s the president, he’s got a bill that’s been offered up, and it’s time to get Kevin McCarthy back to the White House and start working on it.”
Democratic leaders continue to insist that Republicans hike the debt limit with no strings attached, as they have done repeatedly since the GOP took the House majority. Instead, they insist spending should be debated as part of the annual government funding process.
The House GOP package — which would lift the borrowing cap by $1.5 trillion or until the end of March 2024, whichever comes first, and slash $130 billion in government funding next fiscal year — represents a major victory for Republican leaders hoping to gain leverage in stalled talks with the president.
In the letter to top lawmakers Monday, Yellen noted that federal cash flow is “inherently variable,” so the nation’s debt default date could still come “a number of weeks later” than the worst-case prediction.
“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,” Yellen said, noting that it is impossible to predict the exact date the nation could default.
Cash from tax season has come in substantially lower than expected, prompting the Treasury Department’s warning that the U.S. could be at risk of default far sooner than forecasters had originally warned — with Congress’ nonpartisan budget office saying earlier this year that the country could hit the debt ceiling as late as September. Now the Congressional Budget Office is echoing Yellen’s appraisal, also warning Monday that “there is a significantly greater risk” of running out of borrowing ability in early June.
There’s still some hope for a later deadline than early June: If the Treasury Department can scrape by for a few weeks beyond that point, a gush of revenue from quarterly tax receipts on June 15 is likely to help buoy the nation’s borrowing power for several more weeks, along with an accounting maneuver the department is allowed to execute at the end of June.
To give the U.S. extra borrowing power before then, Yellen is taking another unexpected action. The Treasury Department will stop helping state and local governments shift their own debt to fall in line with tax rules, the secretary told lawmakers on Monday.
Yellen noted that the move “is not without costs, as it will deprive state and local governments of an important tool to manage their finances.”
Even before the secretary’s latest warning, the partisan standoff had begun to worry Wall Street traders and executives. They’ve laid out concerns about the likelihood of default in notes to investors but remain wary of pleading more directly to Congress for action to head off a default — one expected to devastate the global economy.
Independent forecasters expect to issue their own updated debt-limit forecasts by mid-month. Those analyses from the Congressional Budget Office and the Bipartisan Policy Center typically offer more detail than the timeframe the Treasury Department publicly releases.