- The US could run out of money as soon as June 1, according to Treasury Secretary Janet Yellen.
- That leaves Congress with as few as 12 working days to act and avert economic crisis.
Treasury Secretary Janet Yellen may have said Congress has a month to raise the debt ceiling — but there are just a handful of days left for lawmakers to actually do so.
It all hinges on the small number of workdays lawmakers have this month.
On Monday, Yellen told Speaker of the House Kevin McCarthy that the US could run out of money to pay its bills as soon as June 1. If Congress does not raise the debt ceiling by then, the country will enter default, which would be unprecedented and economically catastrophic.
It's an entirely preventable crisis, but Congress has to step in to prevent it. That might be a tight squeeze.
That's because the timeline gets a lot shorter when looking at Congress' legislative calendar. The House is only in session 12 days in May, the Senate is in session 14 days, and the two chambers only overlap with each other and with President Joe Biden when he is in Washington, DC for six days this month — meaning there's increased pressure for lawmakers to act on a debt ceiling solution.
Last week, McCarthy passed his bill in the House to raise the debt ceiling by $1.5 trillion or until March 31, 2024, whichever comes first in exchange for roughly $4.5 trillion in spending cuts, but that's likely as far as that legislation will go. Senate Majority Leader Chuck Schumer has called the bill the Default on America Act, or DOA, and he has continued to stand behind Biden's stance that Democrats will not negotiate raising the debt ceiling, and it should be a clean deal without any spending cuts attached.
"The Republican Default on America Act does nothing to actually resolve the looming debt crisis, and it has no hope of ever becoming law," Schumer wrote in a dear colleague letter on Monday. "If anything, the MAGA House Republicans actions have increased the likelihood of default."
Biden is meeting with Schumer, McCarthy, Senate Minority Leader Mitch McConnell, and House Minority Leader Hakeem Jeffries on May 9 to discuss the debt ceiling, and while it's unclear what conclusion the congressional leaders will arrive at, a White House official previously told Insider that Biden "will stress that Congress must take action to avoid default without conditions."
The White House Council of Economic Advisers estimates that a short default would lead to the GDP shrinking by 0.6% and the country shedding half a million jobs. Even in the case of brinkmanship — leaving any action until the last possible minute — the country could lose 200,000 jobs.
"Because the government would be unable to enact counter-cyclical measures in a breach-induced recession, there would be limited policy options to help buffer the impact on households and businesses," the CEA wrote in its analysis.
Even with the White House raising the alarm on the consequences of a default, some GOP lawmakers aren't too worried about Yellen's June 1 deadline.
"I don't believe June 1 is the ceiling, I think that is a political ceiling set by the secretary to put pressure on people," Sen. John Kennedy told Axios. "I think the ceiling is more like [the] end of July, sometime in August."
"Nobody believes her. I don't believe her," he added. "I'm not saying she's a liar, I'm just saying Janet Yellen is no longer an economist and a professor — she's a politician."