‘There are no good options’: the US is running out of money
President Biden and Speaker Kevin McCarthy meet Tuesday afternoon to discuss budget priorities and raise the debt limit at a precarious time: The United States is quickly running out of money to pay its bills.
Lawmakers have less than a month to pass legislation to raise or suspend the debt ceiling, which limits the amount of money the government can borrow. The United States reached its legal debt limit of $31.4 trillion on Jan. 19, and the Treasury Department estimates that the accounting maneuvers it has used to prop up its cash reserves could be exhausted as early as June 1.
If the debt ceiling is not raised before the government runs out of cash — the so-called X-date — it could not be able to pay all of its bills on time, including military salaries, bondholder payments and Social Security checks. If left unresolved, millions of Americans could lose government benefits, stock markets could collapse, and a constitutional crisis could ensue.
The Bipartisan Policy Center, a think tank that tracks the country’s cash reserves, warned Tuesday that the X date will likely be between early June and early August. It said economic risks would increase before the money ran out and it would soon become increasingly difficult to meet the country’s financial obligations.
“The coming weeks are critical for assessing the strength of government cash flows,” said Shai Akabas, the director of economic policy for the Bipartisan Policy Center. “If no resolution is reached by June, policymakers may be playing Russian roulette daily with the full confidence and honor of the United States, risking financial disaster for their constituents and the country.”
Bankruptcy could come sooner than expected as tax revenue trickles into the government’s coffers this spring. The slow pace is due in part to a decision by the Internal Revenue Service to give taxpayers in weather-affected states more time to file their 2022 tax returns.
The crisis has raised new questions about how the federal government might try to prioritize certain payments when it runs out of cash, whether Biden can ignore the debt limit entirely and order the Treasury Department to continue borrowing, and whether far-fetched ideas like since minting a $1 trillion coin could in fact be viable.
Treasury Secretary Janet L. Yellen said on Monday that if the debt limit is not raised, Mr Biden would have to decide how to proceed.
“I would say if Congress doesn’t raise the debt ceiling, the president is going to have to make some decisions about what to do with the resources we have,” Ms. Yellen said on CNBC. “And there are several options, but there are no good options.”
She added that failing to raise or suspend the debt limit would be an “economic catastrophe” and attacked Republicans for holding the economy hostage.
“It’s a gun to the head of the American people and the American economy,” Ms Yellen said.
Mr. Biden and Mr. McCarthy will be joined by Senator Chuck Schumer of New York, the Majority Leader, and Senator Mitch McConnell of Kentucky, the Minority Leader. Ms Yellen will travel to Japan on Tuesday for a meeting of Group of 7 finance ministers and will not attend the meeting at the White House.
The Biden administration and lawmakers are under increasing pressure from business groups to find a way to avoid a default.
“Bankruptcy would deal a serious blow to the economy, leading to widespread job losses, decimated retirement savings and higher borrowing costs for households, businesses and the government,” said Joshua Bolten, the CEO of the Business Roundtable. “Not raising the debt limit would also threaten the central role of the US dollar in the global financial system, to China’s advantage.”
He added: “Securing a two-pronged path forward to raise the debt ceiling couldn’t be more urgent.”