The US Treasury declares default on the fifth day, if there is no agreement

Washington, May 26 (Reuters) – US Treasury Secretary Janet Yellen said Friday (26) that the government will run out of money to pay its bills on June 5, which could lead to a potentially catastrophic default unless Congress raises the $31.4 trillion debt ceiling.

Yellen’s announcement gives more time for Democratic President Joe Biden and Republican House Speaker Kevin McCarthy to reach an agreement to raise the federal government’s self-imposed borrowing limit. The Treasury Department had previously said the deal needed to close by June 1.

Representative Patrick McHenry, one of the Republican negotiators, said they could meet the June 5 deadline.

“We’re not done yet, but we’re close to being able to make it happen and we’ve got to hit some really tough terms,” ​​he told reporters.

Biden told reporters he believes the negotiators are very close to an agreement.

“Things are looking good. I’m very optimistic,” Biden said.

Negotiators appear to have reached an agreement to raise the two-year cap, but they remain at odds over whether to tighten labor requirements for some anti-poverty programmes.

Any deal must win approval in both the Republican-controlled House and the Democratic-led Senate before Biden signs it into law — a process that can take more than a week.

Negotiators have tentatively reached an agreement that would cap spending on several government programs next year, according to a US official.

Safety net programs remained a critical point. The Republican chief negotiator, Jarrett Graves, said his party would not back down from asking more participants to keep a job.

“Of course not. Not a chance,” Graves told reporters.

Biden and his fellow Democrats have resisted pressure from Republicans to require adults without children under 56 to prove they are working or looking for work to qualify for Medicaid and SNAP.

The Republican proposal would require more participants in these programs to show that they are working or looking for a job. That would save $120 billion over 10 years, but it would also force more than 1 million Americans out of these programs, according to the nonpartisan Congressional Budget Office.