US Treasury Secretary Janet Yellen has warned that the US could run out of money by June 1 unless Congress raises or suspends the debt ceiling.
Reaching the debt ceiling would mean that the state could no longer borrow money.
On Monday, Ms Yellen urged Congress to act “as soon as possible” to reach the $31.4 trillion (£25.12 trillion) limit.
President Biden has called a meeting of congressional leaders on the subject for May 9th.
Since 1960, the debt ceiling has been raised, extended or revised 78 times.
A default – which would be the first in US history – could turn global financial markets upside down and shake confidence in the US.
In a letter to members of Congress on Tuesday, Ms Yellen said: “We have learned from previous impasses on debt limits that waiting until the last minute to suspend or raise the debt limit is seriously damaging to business and consumer confidence and in the short term.” can increase borrowing costs for taxpayers and negatively impact the creditworthiness of the United States.”
Ms Yellen added that it is impossible to know for sure exactly when the US will run out of money.
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Her announcement came the same day the Congressional Budget Office (CBO) reported that there is a “substantially greater risk that the Treasury Department will run out of funds in early June.”
“However, the projected depletion date remains uncertain given the difficulty in predicting the timing and levels of revenues and expenses over the coming weeks,” the CBO report said.
The Treasury Department plans to increase total borrowings to about $726 billion by the end of the quarter ended June — about $449 billion more than forecast earlier this year. Officials said that was partly due to lower-than-expected income tax receipts, higher government spending and lower-than-expected cash on hand earlier in the quarter.
In a joint statement Monday, Senate Majority Leader Chuck Schumer and House Democrat Hakeem Jeffries said the US “doesn’t have the luxury of up to 1 for our economy and for millions of American families.”
“Republicans cannot allow the far right to hold our nation hostage. For generations, Congress has made decisions about spending and revenue as part of the annual budget process that is currently underway,” the statement said. “This is the appropriate place to debate and discuss our nation’s financial picture — not in a hostage situation where extreme MAGA Republicans are attempting to impose their radical agenda on America.”
On the Republican side, House Speaker Kevin McCarthy accused President Biden of “refusing to do his job” and “threatening to plunge our nation into its first default.”
“The clock is ticking,” McCarthy said in a statement. “After three months of inaction by the Biden administration, the House of Representatives has acted, and as we speak, there is a bill in the Senate that would eliminate the risk of a default. The Senate and the President need to get to work — and soon. ”
In another letter sent to members of Congress in January, Ms Yellen said the Treasury Department had taken “extraordinary measures” to avoid a government default.
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