Debt Default ‘X-Date’ Now Set For June 5—Not June 1—Buying White House And GOP Precious Negotiating Time

Topline

Treasury Secretary Janet Yellen unexpectedly marked June 5 as the new deadline for avoiding a debt default in a letter to House Speaker Kevin McCarthy (R-Calif.) on Friday afternoon—not long after GOP leaders indicated their optimism in getting a debt ceiling deal completed despite mounting disagreements with the Biden Administration.

House Speaker Kevin McCarthy (R-Calif.) said Friday that progress has been made on a potential deal … [+] to avoid a debt default. (AP Photo/J. Scott Applewhite)

Key Facts

The estimate buys the White House and GOP negotiators four more days to strike a deal, after Yellen previously said the Treasury Department would be “highly likely” to run out of money to pay the federal government’s bills “as early as June 1.”

Earlier Friday, House Republicans signaled optimism regarding a potential deal with McCarthy saying progress had been made in the last 24 hours—however, obstacles still remain.

Rep. Patrick McHenry (R-N.C.) noted that details were still in flux, as the White House and the GOP remain divided on Republican demands for spending cuts in exchange for raising the debt limit.

Crucial Quote

“Each time there’s forward progress, the issues that remain become more difficult and more challenging,” he said.

Key Background

Yellen previously reaffirmed June 1 as the so-called X-date multiple times in the course of the last month, though the Treasury secretary warned in a previous letter to McCarthy the actual X-date could be a “number of days or weeks later” than estimates. Experts have warned that a failure to reach a deal could result in massive hits to financial markets and American jobs. Higher interest rates and the potential triggering of a recession have also become primary concerns for Americans.

What To Watch For

The Treasury Department plans to make $130 billion of scheduled payments the Treasury Department plans to make in the first two days of June, according to Yellen’s letter. The Treasury is scheduled to provide an estimated $92 billion of payments and transfers including a quarterly adjustment of roughly $36 billion toward Social Security and Medicare, Yellen wrote.Yellen added the department swapped approximately $2 billion of Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank on Thursday—a tactic meant to avoid the potential X-date.

Big Number

More than $31.4 trillion. That is the amount of the federal government’s debt.