Treasury Department Secretary Janet Yellen on Friday notified lawmakers the nation will run out of money to pay its bills by June 5 if they do not raise the debt ceiling.
“Based on the most recent available data, we now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5,” Yellen wrote to leaders.
The update may offer negotiators who were working with an estimated June 1 “X-date” more breathing room to clinch a deal to raise the debt ceiling, but it also sets a hard deadline.
At the time of Yellen’s letter, leaders had not announced an agreement, after weeks of struggling to overcome key sticking points.
Rep. Garret Graves (R-La.), a key player in talks, said Friday that proposed changes to work requirements for certain federal assistance programs remained a “huge sticking point,” and signaled more work needs to be done before both sides wrap up a deal on spending caps.
Republicans are pushing for tougher work requirements for programs like Medicaid, Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families — changes many Democrats view as a non-starter.
Graves told reporters that the “White House has been very difficult” on the work requirements matter, and both sides have had difficulty coming to an agreement on spending for defense and nondefense programs.
Reports emerged Thursday night that negotiators had agreed to a two-year increase in the debt ceiling, to be accompanied by spending caps of the same duration, but a source pushed back and said no agreement had been reached.
And while Republican leaders have cited “progress” in talks, they also haven’t released details.
The White House responded positively to Yellen’s most recent comments, saying they underscore the “urgent need” for movement.
“The Secretary’s letters to Congress since January have estimated that Treasury would have insufficient resources to satisfy the government’s obligations in early June and, with the benefit of additional data on outlays and receipts, the Treasury Department is now able to make a more specific estimate of June 5,” National Economic Council Director Lael Brainard said in a statement.
“Negotiators have made progress toward a reasonable, bipartisan budget agreement in recent days, and the Secretary’s letter underscores the urgent need for Congress to act swiftly to prevent default,” she added.
For the past few weeks, stocks have jockeyed back and forth as financial markets appear uneasy amid the debt limit fight. However, Yellen’s letter notably came after stocks closed on the up Friday afternoon.
All three major stock index closed Friday with solid gains. The Dow Jones Industrial Average close with a gain of 328 points, rising 1 percent on the day. The S&P 500 rose 1.3 percent, and the Nasdaq closed Friday with a gain of 2.2 percent.
Yellen had previously warned that lawmakers risked triggering a federal default “by early June, and potentially as early as June 1,” citing lower than expected revenue this tax season. Lawmakers had been looking at June 1 as a deadline, and tensions have risen in the absence of a deal and with default looming.
“Everybody wants the details,” Rep. Patrick McHenry (R-N.C.), another top GOP negotiator and ally of Speaker Kevin McCarthy (R-Calif.), said Friday. “But the larger issue here, agreement that changes the trajectory of our nation’s violence, and that’s what we’re working on.”
“And that’s what we’re working on, and that makes it difficult,” McHenry added.
Emily Brooks, Brett Samuels and Sylvan Lane contributed. Updated at 7:18 p.m.