New Report Underscores Increasing Chances of U.S. Default in Early June

The United States faces an “elevated risk” of running out of cash to pay its bills between June 2 and 13 if Congress does not raise or suspend the nation’s debt limit, according to an analysis released on Tuesday by the Bipartisan Policy Center, an influential think tank that carefully tracks federal spending.

The analysis underscores the growing possibility that the United States will default on its debt as soon as next week. It comes amid negotiations between the White House and Republicans in Congress to reach an agreement that would also lift the $31.4 trillion borrowing cap.

“Come early June, Treasury will be skating on very thin ice that will only get thinner with each passing day,” said Shai Akabas, the center’s director of economic policy. “Of course, the problem with skating on thin ice is that sometimes you fall through.”

The center said that the Treasury Department would be operating on “dangerously low” cash reserves after Memorial Day and that each day in June would come with increasing risk. The department has been using accounting maneuvers known as extraordinary measures to delay a default since the United States technically hit the debt limit in January, but those are expected to be exhausted soon.

The center noted that the federal government could get a reprieve if it can muster sufficient revenue to make it to June 15, when quarterly tax payments are due. That could push a default, the so-called X-date, into July.

However, Treasury Secretary Janet L. Yellen said this week that she thought it was unlikely that the federal government would have enough cash on hand to make it to mid-June.

In a letter to Congress on Monday, Ms. Yellen reiterated her estimate that the X-date could arrive as soon as June 1. Her warning did not come with the caveats included in her previous updates, which had suggested that the government’s cash reserves could potentially last for a few additional weeks. Instead, she emphasized the urgency of the situation.

“If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position and raise questions about our ability to defend our national security interests,” Ms. Yellen said.

As the X-date approaches, the Treasury Department has been checking with federal agencies about the timing of upcoming expenditures. Treasury recently sent a memo to agencies to inquire if any scheduled payments could be delayed. The Washington Post reported earlier on the memo.

The communication is similar to what the Treasury Department conveyed during the 2021 debt limit standoff and is part of how it manages its cash reserves.

“To produce an accurate forecast around the debt limit, it’s critical that Treasury have updated information on the magnitude and timing of agency payments,” Lily Adams, a Treasury spokesperson, said. “As in prior debt limit episodes, Treasury will continue to regularly communicate with all aspects of the federal government on their planned expenditures.”