US extends projected 'X-date' for federal default to June 5

US Treasury Secretary Janet Yellen has said the projected debt ceiling deadline is extended to June 5, four days later than previously estimated.

But Yellen renewed her warning in a letter to Congress on Friday, saying that inaction on raising the borrowing limit would “cause severe hardship.”

Yellen's latest letter to legislators on the "X-date" came as Congress broke for the long Memorial Day weekend.

She said that the Treasury Department had deployed an extraordinary measure not used since 2015 to get the U.S. financial position to this point,

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 has been using since January to stretch existing funds.

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 June 5, sending the US into a potentially catastrophic default with economic spillover around the world.

'We are now in the 12th hour'

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 Friday with Yellen.

"Let's remember we are now in the 12th hour."

Democrat 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.

The debt ceiling, now at $31 trillion, would be lifted for two years to pay the nation's incurred bills.

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.

House Republicans have pushed the issue to the brink, displaying risky political bravado in leaving town for the Memorial Day holiday.

Lawmakers are tentatively not expected back at work until Tuesday, just few days from the June 5 "X-date" when America could face default.