House Republicans aren’t buying Treasury Secretary Janet Yellen’s warning that the US government will run out of money as soon as June 1, or her dire default predictions, downplaying the urgency of raising the debt limit.
“We want to see more transparency in how they arrive at that date,” House Majority Leader Steve Scalise told reporters after a closed-door meeting Tuesday. “It looks like they’re hedging now and opening the door to push that date back.”
A House Republican, who asked not to be named to speak candidly about his party’s assessment, said he believes the U.S. should first stop paying government salaries if the Treasury Department runs out of cash. measures to pay the bills before Congress authorized further borrowing.
White House Press Secretary Karine Jean-Pierre rejected attempts by Republicans to downplay the risk of default.
“Everyone understands that the consequences of a first default would be severe for the American people and the American economy,” Jean-Pierre told reporters at the White House. “It will wipe out 8 million jobs, cause a recession, destroy retirement accounts, increase costs, damage our international reputation.”
The Treasury Department last week asked government agencies to ensure they provide “accurate and timely information” to help forecast daily cash flows and debt levels, according to a memo obtained by Bloomberg News.
The Washington Post earlier reported the memo and cited people familiar with the matter as saying the department is also asking whether any payments could be made at a later date.
Yellen has repeatedly said the Treasury is at risk of not having enough funds to meet all payments until a wave of tax receipts expected on June 15.
The Treasury is not alone in its projections. The Congressional Budget Office SAYS there is a “significant risk” of a default payment in the first two weeks of June without a loan deal. The Bipartisan Policy Center said Tuesday there was a “high risk” of hitting that point between June 2 and 13.
Analysts at Goldman Sachs Group Inc. and Wrightson ICAP wrote June 7-8 as an important danger zone; Morgan Stanley says June 8 is its base case for the X-date, if the Treasury runs out of enough money.
Most of the Republican conference rejecting the urgency announced by the White House, US corporate executives and financial markets is an ominous sign for the negotiations that continue on Tuesday. Representatives of House Republicans and the Biden administration remained at the Capitol on Monday night and met again on Tuesday to press ahead with the trade proposals.
‘Got the Money’
Representative Chip Roy of Texas called the default warnings a “manufactured crisis” to force Republicans to back down from some demands.
“The truth is, we will have cash in June,” Roy told reporters on Tuesday. “The truth is, we will not default on our debt. That is a complete lie. We have the money to do this.”
Roy and other conservatives like Florida’s Matt Gaetz questioned Yellen’s designation of June 1 as the X-date, and told reporters that “she’s going to ask about her Ouija board.”
Speaking to reporters Monday night at the Capitol, after his return from the White House, McCarthy insisted that the real crisis is the unsustainable level of government spending that must be curbed. Asked Tuesday if he believed June 1 was, in fact, the deadline for his negotiations with President Joe Biden, McCarthy was noncommittal.
McCarthy took it
“I don’t choose the deadline,” McCarthy said. “Janet Yellen chose the deadline. He determined what it was and I just followed what he said. “
For weeks, White House officials have noted that they have publicly emphasized the need to quickly extend the debt limit. Last week, Biden canceled planned stops in Papua New Guinea and Australia after the Group of Seven meeting in Japan to return to Washington for negotiations.
And Biden himself stressed the urgency to McCarthy and other congressional leaders before he left for his trip, Jean-Pierre told reporters on Saturday.
“The President sat down twice with congressional leaders recently to hear them, talk, talk about his budget, talk about the urgency of getting the debt limit done, Congress doing their job,” he said. .
While the major banks and financial institutions prepared contingency plans in the event of a technical default, the true fallout for the global economy has yet to be tested.
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon earlier this month that even going to the edge is dangerous, with unpredictable consequences.
Yellen declined to say how the Treasury would proceed if the money ran out, saying only that “there are tough choices to be made.”
-With help from Ari Natter and Justin Sink.