The United States faces an “increased risk” of running out of cash to pay its bills between June 2 and 13 if Congress does not raise or suspend the nation’s debt limit, according to an analysis published Tuesday by the Bipartisan Policy Center, an influential think tank that carefully tracks federal spending.
The analysis underlines the growing possibility that the US will default on its debt as early as next week. It comes amid negotiations between the White House and Republicans in Congress to reach an agreement that would also lift the $31.4 trillion debt ceiling.
“In early June, the Treasury Department will be skating on very thin ice that is only getting thinner with each passing day,” said Shai Akabas, the center’s director of economic policy. “Of course, the problem with skating on thin ice is that sometimes you fall through.”
The center said the Treasury would be operating on “dangerously low” cash reserves after Memorial Day and that each day in June would come with increasing risk. The department has been using accounting maneuvers known as extraordinary measures to delay a default since the US technically hit the debt limit in January, but they are expected to be exhausted soon.
The Center noted that the federal government could get a reprieve if it mustered enough revenue to reach June 15, when quarterly tax payments are due. That could push a default, the so-called X-date, into July.
But Treasury Secretary Janet L. Yellen said this week that she believed it was unlikely the federal government would have enough money to make it through mid-June.
In a letter to Congress on Monday, Ms. Yellen reiterated her estimate that the X date could arrive as soon as June 1. Her warning did not follow the caveats of her previous updates, which had suggested that the government’s cash reserves could possibly last a few more weeks. Instead, she emphasized the urgency of the situation.
“If Congress fails to raise the debt limit, it will cause severe hardship for American families, damage our global leadership position, and raise questions about our ability to defend our national security interests,” Ms. Yellen.
As the X-date approaches, the Treasury Department has been checking with federal agencies about the timing of upcoming spending. Treasury recently sent a memo to agencies to ask if any scheduled payments could be delayed. The Washington Post previously reported on the memo.
The communication is similar to what the Treasury conveyed under the 2021 debt limit and is part of how it manages its cash reserves.
“In order to produce an accurate forecast around the debt limit, it is critical that the Treasury Department has up-to-date information on the size and timing of agency payments,” said Lily Adams, a spokeswoman for the Treasury Department. “As in previous debt ceiling episodes, the Treasury Department will continue to communicate regularly with all aspects of the federal government about their planned spending.”