Will The US Run Out Of Cash By June?

US Treasury Secretary Janet L Yellen highlights imminent concerns of running out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit. Given below are the details of the concerns.

Yellen said in a letter to Congress that the department is unlikely to meet all US government payment obligations "potentially as early as June 1" without action by Congress. The estimate raised the risk that the US is headed for an unprecedented default that would shake the global economy.

Timeline extension
The new potential "X-date", which takes into account April tax payments, is largely unchanged from a previous estimate, issued in January, that the government could run short of cash around June 5.

A new timeline could spark a stand off negotiations between the House, the Senate and Mr. Biden over government spending. The House Republicans have refused to raise limit without deep spending cuts attached.

A key meeting
US President Joe Biden on Monday summoned the four top congressional leaders to the White House next week to discuss the matter. A White House official said Biden would "stress that Congress must take action to avoid default without conditions" on May 9.

The president reached out to Speaker Kevin McCarthy and Representative Hakeem Jeffries of New York, the minority leader, along with Senator Chuck Schumer of New York, the majority leader, and Senator Mitch McConnell of Kentucky, the minority leader to discuss fiscal issues.

Spending cuts
Republicans passed a bill to raise the debt limit last week that includes steep cuts to spending from healthcare for the poor to air-traffic controllers, which the Democratic-controlled Senate and Biden say they will not approve.

Breathing room
Yellen's vagueness on the actual default date is due to some fiscal events in June that could buy some breathing room. If the Treasury can make it past early June benefit payments, it could take in significant cash from quarterly estimated tax payments due on June 15, analysts say.

Impact on elections
The current scenario adds new urgency to political calculations in Washington, where Democrats and Republicans were girding for a months-long standoff. As the current debate heats up, Biden, who is seeking re-election in 2024, is using the House Republican proposal to tag his opposition as a threat to local economies.

A precedent
In 2011, a similar debt ceiling fight took the country to the brink of default and prompted a downgrade of the country's top-notch credit rating. This time, negotiations may be even more difficult, veterans of 2011's face-off say.