As U.S. lawmakers head home for the Memorial Day long weekend, Treasury Secretary Janet Yellen extended the deadline for a deal to raise the government’s $31.4 trillion debt ceiling, but only by four days.
Originally, Yellen said the deadline was as early as June 1 to avoid a potential default but in a letter to Congress on Friday, the date was extended to June 5.
Yellen said her department would make more than $130 billion in scheduled payments in the first two days of the month, including to veterans and Social Security and Medicare recipients, but encouraged the White House and Republicans to come to an agreement “as soon as possible.”
“If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests,” she wrote.
The extension comes as President Joe Biden and Republican Speaker Kevin McCarthy appeared to narrow in on a two-year budget deal that was aimed at curbing federal deficits.
The pair are hoping to strike a compromise over the weekend, but any deal would need to be a compromise as support would be needed from Republicans and Democrats to pass a divided and narrowly-controlled Congress.
On Friday evening before departing for Camp David, Biden said “things are looking good.”
“I’m hoping we’ll have some clear evidence tonight before the clock strikes 12 that we have a deal,” he said. “But it’s very close.”
Despite potential hang-ups, including over stiffer work requirements on people receiving government food stamps, both sides appeared to be optimistic that they could find a deal.
“I’m a total optimist,” McCarthy said Friday. “We’ve got a short time frame. We’re going to work hard to make sure we get this done.”
A top Republican negotiator, Rep. Patrick McHenry, also told reporters Friday afternoon that while a deal had not yet been agreed upon, one was within reach. He added they would be able to raise the limit on the nation’s debt ahead of the June 5 deadline.
Biden stressed the need for a bipartisan agreement, though with him departing for Camp David followed by his home in Delaware, it still raises questions on if a deal could be met this weekend.
In her letter, Yellen said the Treasury Department used an extraordinary cash management measure on Thursday, swapping approximately $2 billion of securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank to stave off the potential default date.
Amid concerns of the potential default, which could send the global economy into chaos, the chief of the International Monetary Fund (IMF) Kristalina Georgieva attempted to soothe concerns, saying historical evidence showed discussions could “come to the brink and then a solution is found.”
“Of course, it is frustrating for everyone to have a solvable problem, that is in the hands of policymakers, continue to linger into the 12th hour,” she said on Friday.
Fitch Ratings agency recently placed the United States’ AAA credit on “ratings watch negative,” warning of a possible downgrade.
The White House has offered to freeze next year’s 2024 spending at current levels, but McCarthy said that’s not enough.
While House of Representatives’ members have headed home and the Senate is on recess until after Memorial Day, lawmakers have been told to be prepared to return to Washington, D.C. should a deal be reached.
— With files from The Associated Press and Reuters