The debt ceiling deadline is extended to June 5, later than previously thought

Treasury Secretary Janet Yellen said on Friday the proposed deadline for the debt ceiling would be extended to June 5, four days later than previously thought.

Still, in a letter to Congress, Yellen reiterated her warning that failure to act on raising the credit limit “would lead to serious difficulties.”

Yellen’s latest letter to lawmakers on “X-Date” came as Congress ended the long Memorial Day weekend. She said that the Treasury Department took an extraordinary measure, not used since 2015, to bring the U.S. fiscal position to this point.

The X-date comes when the government is left with insufficient financial resources to pay all its bills, having exhausted the measures it has taken since January to strain existing funds.

Earlier Friday, House Speaker Kevin McCarthy said his Republican debt negotiators and the White House had reached “the sticking point” and were scrambling to reach an agreement with President Joe Biden to rein in federal spending and raise the country’s borrowing limit before the end of the soon to complete deadline .

They had hoped to end weeks of frustrating talks and reach an agreement by the weekend. The Treasury Department now says the government could run out of money as soon as a week from Monday, throwing the US into a potentially catastrophic default with economic repercussions around the world.

Concerned retirees and social workers were among those who drew up standard contingency plans as lawmakers left town for the long bank holiday weekend. The next Social Security checks are due to be mailed next week.

“The world is watching,” Kristalina Georgieva, executive director of the International Monetary Fund, said after meeting Yellen on Friday. “Let us remember that we are now in the 12th hour.”

Democrat Biden and Republican spokesman tried to calm disagreements and scramble to finalize details of a two-year agreement that would limit federal spending and raise the statutory borrowing limit beyond next year’s presidential election.

Any agreement would have to be a political compromise and support both Democrats and Republicans to pass the divided Congress.

“We know it’s going to be difficult,” McCarthy said upon arriving at the empty Capitol, acknowledging there was more progress to be made.

In a White House speech honoring the Louisiana State University basketball-winning team, Biden appealed to one of those top negotiators that she would “hopefully work out a deal.”

He was referring to Office of Management and Budget Director Shalanda Young, who attended the event, as well as Louisiana Rep. Garret Graves, a top Republican negotiator.

As the outlines of the agreement to cut spending in 2024 and cap 1% spending growth in 2025 take shape, both sides are stuck on various provisions. The debt ceiling, currently at $31 trillion, would be raised for two years to pay the country’s accrued bills.

A person familiar with the talks said the two sides “were at odds” over whether or not to go along with Republican calls for tougher work requirements for people receiving state food stamps, cash assistance and health care assistance.

House Democrats have called such demands for health care and food aid unrealistic.

When asked if Republicans would back down on the job demands, Graves angrily replied, “Damn no, not a chance.”

House Republicans nailed the issue and displayed risky political bravery as they left town for Memorial Day. MPs are not expected to return to work until Tuesday, just two days after the “X-date” on June 1, when Treasury Secretary Yellen said the US was at risk of defaulting.

Biden will also be away this weekend, leaving for the presidential retreat at Camp David, Maryland, on Friday and his home in Wilmington, Delaware, on Sunday. The Senate is on hiatus and will return after Memorial Day.

“Each time progress is made, the remaining issues become more difficult and challenging,” chief negotiator Patrick McHenry, RN.C., said Friday noon.

Weeks of negotiations between Republicans and the White House have yielded no deal — in part because the Biden administration refused to negotiate the debt ceiling with McCarthy, arguing that the country’s full trust and credit rating was not being used as a bargaining chip should be made in order to push through other partisan priorities.

“We have to spend less than last year. That’s the starting point,” McCarthy said.

One idea is to set the top budget numbers, but then add a “snap-back” clause to enforce cuts if Congress is unable to meet the new goals during its annual approval process.

Regarding work requirements for aid recipients, the White House is particularly opposed to measures that could push more people into poverty or access their health care, said the person familiar with the talks, who has been allowed to remain anonymous, adding to the behind-closed-doors discussions to portray.

Regarding Republicans’ call for cutting funds for the Internal Revenue Service, it’s still an “open question” whether the sides will compromise by allowing the funds to flow to other domestic programs, the person said .

One possible development is that Republicans may ease their call to increase defense spending beyond the level Biden has proposed in his budget, offering instead to keep it at the level he is proposing, according to another familiar with the talks Person.

The teams are also eyeing a proposal by Senator John Hickenlooper, D-Coloro, to encourage the development of power transmission lines to facilitate the construction of an interregional power grid.

Meanwhile, McCarthy is feeling pressure from the right flank in the House of Representatives not to back down on any deal, even if it means missing the June 1 deadline.

“Let’s hold the line,” said Rep. Chip Roy, R-Texas, a member of the Freedom Caucus.

McCarthy said Donald Trump, the former president who is running for office again, told him, “Make sure you get a good deal.”

However, vigilant Democrats are also putting pressure on Biden. The top three House Democrat leaders, led by Representative Hakeem Jeffries, spoke to the White House late Thursday.

Even if negotiators reach an agreement in the coming days, McCarthy has promised lawmakers he will stick to the rule of publishing any bill 72 hours before the vote — now likely Tuesday or even Wednesday. The Democrat-dominated Senate has vowed to move quickly and get the package to Biden’s desk just before the possible deadline next Thursday.

Meanwhile, rating agency Fitch put the United States’ AAA credit rating on “ratings watch negative,” warning of a possible downgrade.

The White House has continued to argue that deficits can be reduced by removing tax breaks for wealthier households and some businesses, but McCarthy said he had already told the president at the February meeting that increasing revenue from tax hikes was off the table.

While Biden has ruled out invoking the 14th Amendment to raise the debt ceiling alone for now, House Democrats announced they have all agreed to a legislative “relief process” that would force a vote on the debt ceiling. But they need five Republicans to break with their party and get the majority to go ahead with the plan.

It is all but certain that they will recover around $30 billion in unspent COVID-19 funds after the pandemic emergency is officially lifted.

___

Associated Press writers Mary Clare Jalonick, Stephen Groves, Fatima Hussein, Farnoush Amiri, and video journalist Rick Gentilo contributed to this report.

Editor’s Note • This story is available only to Salt Lake Tribune subscribers. Thank you for supporting local journalism.