The US may default on its debt obligations by June 5, four days later than the earlier projection, if lawmakers do not come to a resolution for the federal debt ceiling, Treasury Secretary Janet Yellen told Congress on May 26.

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In a letter to House Speaker Kevin McCarthy, cited by CNBC US, Yellen wrote, “We now estimate that the Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5.”

Yellen’s letter comes at a time when tensions have built over whether a deal between the White House and Republicans in Congress will be struck in time as the so-called “X-date” draws close. Last time, the date was updated on May 1. Yellen had then said the US had enough cash available to meet its obligations until “early June, and potentially as early as June 1.”

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If the “X-date” estimated by the Treasury arrives and the US debt ceiling is not raised, it would mean the Joe-Biden led government will no longer have enough of a financial cushion to pay all of its bills, having exhausted the extraordinary measures it has been employing since January to stretch existing funds.

“The extremely low level of remaining resources demands that I exhaust all available extraordinary measures to avoid being unable to meet all of the government’s commitments,” Yellen said in her letter.

The Treasury Secretary informed the Congress that it had used one measure for the first time since 2015 to get the US financial position to this point: a swap of roughly $2 billion in Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank.

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“We have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June,” she added.

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Meanwhile, House Speaker Kevin McCarthy and his Republican debt negotiators hit crunch time on May 26 at the Capitol, straining to wrap up an agreement with President Joe Biden over the debt ceiling.

They hope to end weeks of frustrating talks and strike a deal by this weekend.

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Democrat Biden and the Republican speaker were narrowing differences, labouring to lock in details on a two-year agreement that would restrain federal spending and lift the legal borrowing limit past next year's presidential election. Any deal would need to be a political compromise, with support from both Democrats and Republicans to pass the divided Congress.

If the US defaults, White House estimates say a prolonged default could cause 8.3 million job losses and a world-shaking recession, while even a brief default could lead to 500,000 fewer jobs. Moody’s Analytics has estimated that a default of no longer than a week would lead to the loss of 1.5 million jobs.

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