US Treasury Secretary Janet Yellen has extended the deadline for raising the federal debt limit, saying the government would default on its obligations if Congress does not increase the country's $US31.4 trillion ($48 trillion) debt ceiling by June 5.
Ms Yellen had previously said a default could happen potentially as early as June 1.
The extension buys White House and congressional negotiators more time to strike a deal to raise the statutory ceiling on the nation's borrowing capacity.
In a letter to Congress, Ms Yellen said her department will make more than $US130 billion of scheduled payments in the first two days in June, including to veterans and Social Security and Medicare recipients.
"During the week of June 5, Treasury is scheduled to make an estimated $US92 billion of payments and transfers," including a roughly $US36 billion quarterly adjustment toward Social Security and Medicare trust funds, Ms Yellen wrote.
"Therefore, our projected resources would be inadequate to satisfy all of these obligations," she said.
Ms Yellen also said the department used an extraordinary cash management measure on Thursday, swapping approximately $US2 billion of Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank to stave off the potential default date.
The measure was last used in 2015, she said.
Ms Yellen's latest letter to legislators on the "X-date" came as Congress broke for the long Memorial Day weekend.
The X-date arrives when the government no longer has enough of a financial cushion to pay all its bills, having exhausted the measures it's been using since January to stretch existing funds.
'We are now in the 12th hour'
Earlier on Friday, House Speaker Kevin McCarthy said his Republican debt negotiators and the White House had hit "crunch" time, straining to wrap up an agreement with President Joe Biden to curb federal spending and lift the nation's borrowing limit ahead of the fast-coming deadline.
They had hoped to end weeks of frustrating talks and strike a deal by this weekend.
Treasury now says the government could start running out of money as soon as a week from Monday, sending the US into a potentially catastrophic default with economic spillover around the world.
Anxious retirees and social service groups were among those making default contingency plans as lawmakers left town for the long holiday weekend.
The next batch of Social Security checks are due to go out next week.
"The world is watching," said International Monetary Fund managing director Kristalina Georgieva after meeting on Friday with Ms Yellen.
"Let's remember we are now in the 12th hour."
Mr 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.
Weeks of negotiations fail to produce deal
While the contours of the deal have been taking shape to cut spending for 2024 and impose a 1 per cent cap on spending growth for 2025, the two sides remain stuck on various provisions.
The debt ceiling, now at $US31 trillion, would be lifted for two years to pay the nation's incurred bills.
Weeks of negotiations between Republicans and the White House have failed to produce a deal — in part because the Biden administration resisted negotiating with Mr McCarthy over the debt limit, arguing that the country's full faith and credit should not be used as leverage to extract other partisan priorities.
"We have to spend less than we spent last year. That is the starting point," said Mr McCarthy.
Even if negotiators strike a deal in coming days, Mr McCarthy has promised he will abide by the rule to post any bill for 72 hours before voting — now likely on Tuesday or even Wednesday.
The Democratic-held Senate has vowed to move quickly to send the package to Mr Biden's desk, right before next Thursday's possible deadline.
A person familiar with the talks said the two sides were “dug in” on whether or not to agree to Republican demands to impose stiffer work requirements on people who receive government food stamps, cash assistance and health care aid.
House Democrats have called such requirements for health care and food aid a non-starter.
The White House has continued to argue that deficits can be reduced by ending tax breaks for wealthier households and some corporations, but Mr McCarthy said he told the president as early as their February meeting that raising revenue from tax hikes was off the table.
While Mr Biden has ruled out, for now, invoking the 14th Amendment to raise the debt limit on his own, Democrats in the House announced they have all signed on to a legislative "discharge" process that would force a debt ceiling vote. But they need five Republicans to break with their party and tip the majority to set the plan forward.
They are all but certain to claw back some $US30 billion in unspent COVID-19 funds now that the pandemic emergency has officially been lifted.
ABC/wires
