US Treasury Secretary Janet Yellen has set a new deadline for a possible US debt default to June 5 if Congress fails to raise the borrowing limit. This gives negotiators for President Biden and House Republican Speaker Kevin McCarthy more time to find a bipartisan solution. Currently, the US federal government can only spend what it brings in through taxes, but special accounting measures have been used to extend the life of the money it is allowed to spend. If the debt ceiling is not raised, the Treasury could defer certain payments for Social Security, Medicare and Medicaid programs, or pause some payments across the board. Republicans and Democrats will have to reach agreement to lift the debt ceiling or make significant spending cuts.
In mid-January, the US federal government reached its borrowing cap of more than $31 trillion. The Treasury Department will have a funding shortfall of more than $100 billion between June 1-15 if the debt ceiling is not raised. If the Treasury Department makes it to June 15 without defaulting on any of its financial obligations, it may be able to avoid a damaging default in the weeks that follow. However, this plan is not sustainable as tax revenues consistently bring in less than the government spends. The White House has stated that default is not an option and all responsible lawmakers understand that.