Debt ceiling deal needs to happen by June 5 to avoid default: Yellen – National

As U.S. lawmakers head home for the Memorial Day long weekend, Treasury Secretary Janet Yellen extended the deadline for a deal to raise the government’s $31.4 trillion debt ceiling, but only by four days.

Originally, Yellen said the deadline was as early as June 1 to avoid a potential default but in a letter to Congress on Friday, the date was extended to June 5.

Yellen said her department would make more than $130 billion in scheduled payments in the first two days of the month, including to veterans Social Security Medicare recipients, but encouraged the White House Republicans to come to an agreement “as soon as possible.”

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

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The extension comes as President Joe Biden Republican Speaker Kevin McCarthy appeared to narrow in on a two-year budget deal that was aimed at curbing federal deficits.

The pair are hoping to strike a compromise over the weekend, but any deal would need to be a compromise as support would be needed from Republicans Democrats to pass a divided narrowly-controlled Congress.

Click to play video: 'McCarthy says Democrats ‘addicted to spending’ ahead of Biden debt ceiling meeting'

McCarthy says Democrats ‘addicted to spending’ ahead of Biden debt ceiling meeting

Despite potential hang-ups, including over stiffer work requirements on people receiving government food stamps, both sides appeared to be optimistic that they could find a deal.

“We knew this would not be easy,” McCarthy said as he left the Capitol on Thursday.

Biden stressed the need for a bipartisan agreement, though with him departing for Camp David followed by his home in Delaware, it still raises questions on if a deal could be met this weekend.

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“I believe we’ll come to an agreement that allows us to move forward protect the hardworking Americans of this country,” he said Thursday.

Click to play video: 'U.S. debt ceiling crisis: White House says negotiations continue ‘in good faith’'

U.S. debt ceiling crisis: White House says negotiations continue ‘in good faith’

In her letter, Yellen said the Treasury Department used an extraordinary cash management measure on Thursday, swapping approximately $2 billion of securities between the Civil Service Retirement Disability Fund the Federal Financing Bank to stave off the potential default date.

Amid concerns of the potential default, which could send the global economy into chaos, the chief of the International Monetary Fund (IMF) Kristalina Georgieva attempted to soothe concerns, saying historical evidence showed discussions could “come to the brink then a solution is found.”

“Of course, it is frustrating for everyone to have a solvable problem, that is in the hands of policymakers, continue to linger into the 12th hour,” she said on Friday.

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While House of Representatives’ members have headed home the Senate is on recess until after Memorial Day, lawmakers have been told to be prepared to return to Washington, D.C. should a deal be reached.

With files from The Associated Press

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