Yellen changes default date to June 5, lessening debt ceiling talks pressure.

Good news for the US economy! Treasury Secretary Janet Yellen has revised the projected X-date for the budget ceiling to June 5, giving negotiators four more days to forge a compromise on the terms for raising the $31.4 trillion borrowing limit.

What is X-Date?

The X-date refers to the date when the Treasury will lack the funds to pay all of the nation’s bills on time if Congress does not raise the federal spending limit. Yellen updated the prediction on the afternoon of May 26, revising the previous estimate of “early June” given in January and later revised to “potentially as early as June 1.”

Points of Contention

President Joe Biden has insisted that negotiations are over spending cuts and other provisions of the Limit, Save, Grow Act passed by the House in April, not the debt ceiling itself. He maintains that Congress has a constitutional duty to increase the debt limit in order to preserve the full faith and credit of the United States.

House Speaker Kevin McCarthy (R-Calif.) said beginning in January that Republicans will not raise the debt limit unless Democrats agree to reduce federal discretionary spending in 2024 with no increase in taxes.

The Limit, Save, Grow Act raises the debt limit by $1.5 trillion while lowering federal discretionary spending to the 2022 level, capping annual spending increases at 1 percent for 10 years, strengthening work requirements for some recipients of federal assistance, taking back unspent COVID-19 funds, and easing requirements for permits to drill for oil and gas.

Bipartisan Agreement

Details of a possible bipartisan agreement were leaked on May 25. The supposed plan would increase the debt limit by $3.5 trillion to $4 trillion and cut spending, according to Rep. Chip Roy (R-Texas), but would not include all Republican demands.

The president said on May 25 that he has offered to cut spending, but negotiations are ongoing.

Conclusion

The revised default date provides breathing room for negotiators, who have been meeting intently for two weeks to forge a compromise on the terms for raising the borrowing limit. Stay tuned for more updates on this developing story!