WASHINGTON — Republicans in Congress and the Biden administration have until at least June 5 to negotiate and enact a debt limit bill based on new Treasury Department estimates, giving negotiators a few more days before for the country to default.
“Based on the most recent data available, we now estimate that the Treasury will have insufficient resources to meet the government’s obligations if Congress has not raised or suspended the debt limit by June 5,” the Treasury secretary wrote, Janet Yellen, in a letter posted Friday afternoon.
Yellen wrote that political leaders have “learned from past debt limit impasses that waiting until the last minute to suspend or raise the debt limit can do serious damage to business and consumer confidence, increase costs of short-term debt for taxpayers and have a negative impact on credit. rating of the United States.
“In fact, we’ve already seen Treasury borrowing costs rise substantially for securities maturing in early June,” Yellen added. “If Congress does not increase the debt limit, it would cause serious hardship for American families, damage our global leadership position, and cast doubt on our ability to defend our national security interests.”
Negotiations over the country’s debt ceiling and government spending continued behind closed doors on Friday, though broad parameters of a deal began to emerge.
Chairman Kevin McCarthy, a California Republican, told reporters in the Capitol building Friday morning that the two sides would continue to work toward a bipartisan agreement on the open items.
“I thought we made progress last night. We have to move further now,” she said, noting that he took a bike ride that morning with the negotiator, Rep. Garret Graves, a Louisiana Republican.
McCarthy reiterated that there remains a key disagreement over how much the federal government should spend.
He also lobbied to improve work requirements for able-bodied adults without dependents enrolled in some federal safety net programs. McCarthy has repeatedly tried to defend the changes during interviews and television appearances, as the Biden administration has rejected calls to change existing requirements.
If the Republicans, who control the US House of Representatives, the Democrats, who control the US Senate, and the White House do not address the debt limit soon, the country could default.
If that happens, payments for hundreds of federal programs will likely be delayed and the economy could start moving toward a global recession, economists say.
Yellen wrote in the letter that the federal government has enough money available to make payments to veterans, as well as Social Security and Medicare beneficiaries, totaling more than $130 billion on June 1 and 2.
The week of June 5, he wrote, the Treasury is supposed to make $92 billion in payments and transfers, yet “projected government resources would be inadequate to meet all of these obligations.”
Default value ‘unacceptable’
Treasury Assistant Secretary Wally Adeyemo said Friday on CNN’s “This Morning” that the default was “unacceptable.”
“The president is committed to making sure that we have a good faith negotiation with the Republicans to reach an agreement, because the alternative is catastrophic for all Americans,” Adeyemo said.
“People often think of the debt limit as something that only affects financial markets,” Adeyemo added. “But it would also mean that we can’t meet our commitments to the same beneficiaries that you just talked about, to our seniors, to our veterans. And we know that’s unacceptable.”
Russ Vought, a budget director during the Trump administration, said Friday morning on C-SPAN that he was “shocked by how bad the deal parameters are emerging.”
“Basically it’s almost worse than a clean debt limit,” Vought added.
Summing up his understanding of the negotiations, Vought said, he would set spending limits for two years with some exclusions. Negotiators were discussing increasing funding for defense and veterans while freezing other discretionary spending accounts, he said.
“When you raise veterans by that amount of money, and I think they should, you’re not going to get to the kind of cuts that are necessary to be minimally less (spending) than last year,” Vought said.
The talks, he said, would remove a portion of the Democrats’ $80 billion increase in funding for the Internal Revenue Service that they passed as part of their climate change, health care and tax bill known as the Income Reduction Act. Inflation, but not everything.
“I’m really in awe of how incompetent they’ve been,” Vought said of McCarthy and his top Republican negotiators.
McCarthy defends himself against criticism
McCarthy, speaking to reporters on Capitol Hill Friday morning, dismissed criticism from conservative Republicans, including from his own conference.
McCarthy said that since negotiators were still working out disagreements and there was no final agreement, members did not know what a final bill would include.
Discretionary spending makes up about a third of all federal funds, with the other two-thirds going to mandatory programs like Social Security, Medicare and Medicaid.
McCarthy has pledged not to cut spending on Social Security, Medicare, defense accounts or veterans’ programs, leaving the cuts to be made at a fraction of the annual budget.
In fiscal year 2022, the federal government spent $4.1 trillion on mandatory programs and about $1.7 trillion on discretionary programs, according to the nonpartisan Congressional Budget Office.
During the same fiscal year, the federal government generated $4.9 trillion in revenue through taxes and fees, running an annual deficit.
To pay for expenses approved by Congress that were not paid with revenue, the Treasury Department borrowed money under authority given to it by Congress as part of the debt limit.
Ashley Murray contributed to this report.