Treasury Hits Danger Zone After Memorial Day: Analysis
The Debt

Treasury Hits Danger Zone After Memorial Day: Analysis

REUTERS/Lucas Jackson

There is an “elevated risk” that the U.S. Treasury will be unable to pay all of its bills during the first two weeks of June, according to an updated analysis released Tuesday by the Bipartisan Policy Center.

“BPC projects that if policymakers do not act on the debt limit, Treasury will most likely have insufficient cash to meet all its financial obligations sometime between early June and early August 2023, with an elevated risk between June 2 and June 13 (what we call the X Date),” the nonpartisan think tank said.

Shai Akabas, BPC’s director of economic policy, said the Treasury will be “skating on thin ice” in early June, with the ice growing thinner each day until June 15, when an influx of tax payments will provide a new cushion. “Of course, the problem with skating on thin ice is that sometimes you fall through,” Akabas said.

According to BPC, the Treasury will enter a danger zone in about a week. “Shortly after Memorial Day, the government will begin operating with dangerously low levels of reserves as the Treasury Department steadily draws down its remaining extraordinary measures and cash on hand,” the group said. “Even before Treasury has fully emptied its coffers, each day in early June carries an increasing chance of defaulting on our obligations and the associated economic turbulence.”

Republicans have their doubts: Although there is a growing consensus that the Treasury seriously risks running out of cash in the first two weeks of June, some Republicans say they doubt that June 1 is a “hard deadline” for raising or suspending the debt limit, as Yellen recently referred to it, and some even doubt there is any risk at all.

“I don't believe that the first of the month is a real deadline,” Rep. Matt Gaetz of Florida said Tuesday. “Like, I don't understand why we're not making Janet Yellen show her work.”

Gaetz argued that Yellen has been wrong before, and so may be wrong again. “Yellen couldn't see inflation coming like an oncoming train,” he said. “But she wanders out of some backroom in the White House with a Ouija board … telling us the 1st of the month is the number.”

Another conservative firebrand, Rep. Chip Roy of Texas, also cast doubt on the validity of Yellen’s warning. Asked about the June 1 deadline, Roy said, “Ask Janet Yellen. She’s the one with the magic Ouija board.”

Roy added that he doesn’t think the Treasury would run out of money in June. “The fact is, we’re gonna have cash in June,” he said. “The fact is, we’re not going to default on our debt. That’s just completely false. We’ve got the money to do it.”

House Financial Services Committee Chairman Patrick McHenry, who is involved in the negotiations with the White House and has accused the White House of lacking “urgency” in the talks, said he, too, has doubts about the deadline.  

“I want to trust the Treasury’s math, but they’re going to have to show their work,” McHenry told The Hill. “And if the White House team doesn’t have a sense of urgency, if the President doesn’t have a sense of urgency here, then that raises more questions — valid questions — about how they justify the date.”