May 22, 2023 Latest on US debt ceiling negotiations

Cash levels at the US Treasury are shrinking and could drop to dangerously low levels by June 9, according to projections from economists at Goldman Sachs.

Treasury Secretary Janet Yellen reiterated over the weekend that early June is a “hard deadline” for Congress to raise the debt ceiling, with the federal government running out of cash as soon as June 1.

Goldman Sachs thinks there might be wriggle room – but not much. 

In a report to clients late Friday, Goldman Sachs economists wrote that by June 8 or June 9, cash at the Treasury is likely to drop under $30 billion – the bare minimum level Treasury has used in the past to project the deadline. 

The Treasury’s operating cash balance plunged to $57.3 billion as of the close of business on Thursday, down from $238.5 billion at the start of the month, according to federal data.

Goldman Sachs thinks there is a 70% chance that Congress will reach a deal to address the debt ceiling, and a 5% chance that the deadline gets pushed back.

That leaves a 25% chance of no deal in Congress, with the most likely outcome (15%) a short-term extension by Congress. 

Goldman Sachs says there is a 6% chance that Treasury is forced to stop making most payments while continuing to make interest and principal payments on US debt, and a 4% chance that Treasury ignores the debt limit to continue borrowing and make all scheduled payments. 

“While we expect a deal to occur ahead of the deadline,” Goldman Sachs economists wrote, “we also expect a few more twists along the way, and suspect that markets are likely to price in additional risk before the debt limit is finally raised.”

House Republicans are insisting on spending cuts before they will agree to raise the nation’s debt ceiling past $31 trillion.

Democrats argue Congress already spent the money and must be allowed to repay America’s debt holders without an embarrassing and economically disastrous default.

President Joe Biden returned early from a trip to Asia to restart negotiations with House Speaker Kevin McCarthy, a California Republican. They are set to meet again Monday afternoon.

The clock is ticking down to a US default, but it’s not entirely clear when the US will officially run out of cash. It’s also not clear what a potential deal to avert a first-ever default will look like.

If you haven’t been following the debt drama, here are answers to some questions to get you up to speed:

Read more about this here.

US markets opened slightly higher on Monday morning as traders closely watched the ongoing debt ceiling negotiations among lawmakers in Washington, DC.

President Joe Biden and Republican House Speaker Kevin McCarthy are expected to meet once again on Monday after stalled talks this weekend on avoiding a catastrophic government default on debt.

US Treasury Secretary Janet Yellen reaffirmed on Sunday that June 1 is the “hard deadline” for the United States to raise the debt ceiling or risk defaulting on its obligations.

Still, Wall Street appears to be shaking off the approaching X-date, now less than two weeks away. Markets ended last week on a high note, The Nasdaq Composite grew by 3%, the S&P 500 was up nearly 1.7% and the Dow gained 0.4%. 

Here's a look at where things stand in the markets:

The White House negotiators have arrived on Capitol Hill this morning after a series of fits and starts in the debt limit negotiations over the weekend. 

They did not comment on a series of questions about the stakes of the negotiations.

In a news conference over the weekend, President Joe Biden addressed the possibility of using the 14th Amendment to continue US government borrowing in the absence of a deal, suggesting he has the power but not the time to utilize the unilateral action.

Pressed by CNN to clarify whether he thought he could invoke the 14th Amendment as a serious and tangible option, the president made clear that maneuver would not be successful given the short window remaining.

“We have not come up with unilateral action that could succeed in a matter of two weeks or three weeks. That’s the issue. So it’s up to lawmakers. But my hope and intention is to resolve this problem,” he said.

Republican Sen. Bill Cassidy of Louisiana said Sunday a potential invocation of the 14th Amendment would be a “dodge.”

“The president needs to show leadership. ‘OK, House Republicans, American people, you’re concerned about spending, I will meet you there. As opposed to finding a dodge that tries to work its way around,” Cassidy said.

Treasury Secretary Janet Yellen reiterated Sunday in an interview with NBC News that June 1 was a “hard deadline” for the US to raise the debt ceiling or risk defaulting on its obligations.

But Rep. Brian Fitzpatrick, a co-chair of the bipartisan Problem Solvers Caucus, said there may be some leeway.

“The June 1st date was probably, according to Secretary Yellen, the earliest possible date,” the Pennsylvania Republican told CBS News, adding that “we do have enough cash flow” to “pay the interest on our debt.”

“We’re going start to see the state tax revenues come in the second week of June, so I think we’re OK on that,” Fitzpatrick said.

More on the 14th Amendment: Some experts, including Laurence H. Tribe of Harvard Law School, point to Section 4 of the amendment as the basis of their argument that the president has the authority to order the nation’s debts be paid regardless of the debt limit Congress put in place more than 100 years ago.

“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned,” reads the section, which refers to the debt incurred by the Union to fight the Civil War.

Lawmakers who crafted the amendment are very strongly saying that once the US borrows money, it has to pay it back, said Garrett Epps, a constitutional law professor at the University of Oregon. The section was designed to remove debt payments from potential post-war partisan bickering between the North and South, but it also applies to the wide divide between Democrats and Republicans today.

“The federal government is required to pay the debt on time in full,” said Epps, who has long supported using this option in the event Congress refuses to raise the debt ceiling.

Keep reading about the amendment and how it factors into the debt ceiling debate here.

CNN's Tami Luhby contributed reporting in this post.

The CEO of IBM said Monday he is confident that the debt ceiling will be resolved, but warned that a failure to extend it would be a “highly destabilizing” event for business and the global economy.

"I’m actually confident that the United States will not breach, meaning all its debt will get paid but when is the exact question,” Krishna said.

Treasury Secretary Janet Yellen reaffirmed June 1 as the hard deadline for the US to raise the debt ceiling or risk defaulting on its obligations.

Yellen’s warning came hours after President Joe Biden delivered a grim assessment of the state of negotiations during his remaining hours in Japan for the G7 summit.

Biden issued a stark warning Sunday ahead of his high-stakes phone call with House Speaker Kevin McCarthy, saying congressional Republicans could use a national default to damage him politically. He also acknowledged time had run out to use potential unilateral actions to raise the federal borrowing limit, a sharp shift in tone days before the deadline to reach an agreement.

Reflecting that shift in tone, Yellen reiterated that some bills will go unpaid if the debt ceiling isn’t raised.

“Since 1789, the United States has a history of paying its bills on time. That's what the world wants to see — a continued commitment to do that," Yellen continued. "It's what underlies US Treasury securities as the safest investment on the planet. And it's not an acceptable situation for us to be unable to pay our bills.”

Yellen agreed with the president’s assessment that invoking the 14th Amendment, “doesn't seem like something could be appropriately used in these circumstances,” given the legal uncertainty and time frame. She downplayed the possibility of some extra unilateral action the president could take.

“My devout hope is that Congress will raise the debt ceiling,” she said. “There will be no acceptable outcomes if the debt ceiling isn't raised, regardless of what decisions we make.”

The countdown is on, the stakes are high – and there is still no debt limit deal.

President Joe Biden and House Speaker Kevin McCarthy are slated to meet again Monday, following a weekend notable for its lack of progress in trying to reach a deal to avoid the country’s first-ever default on its debt.

Negotiations between the White House and the House GOP hit a snag and were put on pause Friday, and representatives from each side spent most of the next two days criticizing the other while defending their own positions.

In a sign of a possible thaw, Biden and McCarthy spoke over the phone as the president was aboard Air Force One, heading back to Washington after a shortened trip to Japan. McCarthy told reporters Sunday that the call was “productive.” But that came after Biden had sharply criticized Republicans at a news conference in Hiroshima, where he said he wasn’t able to promise fellow world leaders gathered for Group of Seven talks that the US would not default.

“I can’t guarantee that they will not force a default by doing something outrageous,” Biden said shortly before his departure tor the US.

It’s not uncommon for high-stakes negotiations on Capitol Hill to encounter setbacks and later recover, but the weekend-long snag underscored the challenge of finding consensus between the two sides as key sticking points remain.

Time is running short to raise the nation’s borrowing limit and the US could default as soon as June 1, the Treasury Department has warned, a position that Treasury Secretary Janet Yellen repeated Sunday. If lawmakers and the White House are unable to reach a deal, a global economic catastrophe would likely be triggered.

Read more here.

America is heading close to the brink of a self-imposed economic disaster with the Republican-led House refusing to pay the country’s debts unless President Joe Biden agrees on cuts to current and future spending and new curbs on social programs.

Unless a compromise to raise the government’s borrowing authority is reached within days, the US could lose its reputation as the stable anchor of the global economy. Millions of people could see retirement and veterans benefits put on hold once the government exhausted its ability to pay its debts due to the borrowing cap set by Congress.

A US default would reverberate through the financial market, likely triggering a recession that would cause serious job losses and shatter an already fragile sense of economic security for many families.

After a weekend of acrimony between negotiators for House Republicans and the White House, Biden will meet House Speaker Kevin McCarthy Monday for critical talks on pulling the economy back from the precipice. The president just returned to the US from Japan, where he was put in the stunning position of being unable to reassure fellow world leaders that Washington will not tip the global economy into chaos.

Pressure on the meeting is immense, since Treasury Secretary Janet Yellen has warned that the government will be unable to meet its obligations unless Congress raises the debt ceiling by June 1. But serious damage could occur before then because the mere suggestion that the crisis cannot be solved could send panic through financial markets and damage confidence in US creditworthiness.

Biden has already backed down from his position that he will not negotiate over the debt limit — which needs to be raised to pay for spending already authorized by Congress and authored by him and previous presidents. His officials say it’s irresponsible for the GOP to hold the country “hostage” on such a critical issue. Republicans, however, say that the government is spending too much money and see the threat of financial calamity as their premier leverage against Biden.

While Biden was in Japan, the only stop of a longer trip he was forced to cut short, negotiators from both sides appeared to make progress before talks stalled, with each side blaming the other. The president suggested that the pro-Donald Trump extremists in the House were ready to sabotage the economy in a bid to doom his reelection campaign.

“I think there are some MAGA Republicans in the House who know the damage it would do to the economy, and because I am president, and a president is responsible for everything, Biden would take the blame and that’s the one way to make sure Biden’s not reelected,” he said in Japan.

McCarthy said Sunday morning that Biden was shifting positions because of pressure within his own party. “So I think he’s got to get away from the socialist wing of the Democratic Party and represent America,” the speaker told reporters.

Read the full analysis here.