President Biden said he would meet with lawmakers on May 9 to discuss ways to avoid a default.
WASHINGTON — Treasury Secretary Janet Yellen notified Congress on Monday that the U.S. could default on its debt as early as June 1, if legislators do not raise or suspend the nation’s borrowing authority before then and avert what could potentially become a global financial crisis.
In a letter to House and Senate leaders, Yellen urged congressional leaders “to protect the full faith and credit of the United States by acting as soon as possible” to address the $31.4 trillion limit on its legal borrowing authority. She added that it is impossible to predict with certainty the exact date of when the U.S. will run out of cash.
The new timeline could accelerate negotiations between the House, the Senate and Mr. Biden over government spending — a high-stakes standoff between the president and House Republicans who have refused to raise the limit without deep spending cuts attached.
In response to Ms. Yellen’s new timeline, Mr. Biden on Monday called the top four leaders in Congress to ask for a meeting on May 9 to discuss fiscal issues. 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.
Mr. McCarthy has accepted the invitation, a person familiar with the developments said on Tuesday.
Economists have warned that failure to raise the debt limit, which caps the total amount of money the United States can borrow, threatens to rock financial markets and throw the global economy into a financial crisis.
Because the United States runs a budget deficit — meaning it spends more money than it takes in — it must borrow huge sums of money to pay its bills. In addition to paying Social Security benefits, along with salaries for the military and government workers, the United States is also required to make interest and other payments to the bondholders who own its debt.
The Treasury Department had previously projected that it could run out of cash sometime in early June, but the new estimate raises the alarming prospect that the United States could be unable to make some payments, including to bondholders, in a matter of weeks.
“Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments,” Ms. Yellen said in a letter to Congress.
Democrats and the White House are pushing for Congress to increase the federal debt limit. President Joe Biden wants the cap raised without negotiation. The House Republican majority has most recently passed a bill to secure spending cuts in exchange for a debt limit increase. Biden on Monday invited the four Congressional leaders to the White House on May 9 to discuss the matter.
Yellen said last week at the Cap-to-Cap policy conference in Washington: “Congress must vote to raise or suspend the debt limit, and it should do so without conditions and it should not wait until the last minute. I believe that is a basic responsibility of our nation’s leaders to get this done.”