Yellen Warns US May Hit Debt Limit in October
WASHINGTON — Treasury Secretary Janet Yellen is warning Congress that she will run out of maneuvering room to prevent the U.S. from broaching the government’s borrowing limit in October.
In a letter to congressional leaders on Wednesday, Yellen said that she could not provide a specific date for when she will no longer be able to keep the government funded absent action by Congress to raise the debt limit.
“Based on our best and most recent information, the most likely outcome is that cash and extraordinary measures will be exhausted during the month of October,” Yellen wrote.
Yellen went on to say that forecasting the payments and receipts of the U.S. government is always an uncertain endeavor, one that has been made more challenging by uncertainties related to the pandemic and the dispersal of relief dollars to address them.
“After the debt limit was reinstated on Aug. 1, Treasury began employing certain extraordinary
measures to continue to finance the government on a temporary basis,” she said. “These measures, which are authorized by law and have been used in previous debt limit impasses, include a suspension of certain investments in the Civil Service Retirement and Disability Fund, the Postal Service Retiree Health Benefits Fund, and the Government Securities Investment Fund of the Federal Employees’ Retirement System Thrift Savings Plan.”
But, Yellen warned, “Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligations for the first time in our history.”
The Treasury Secretary’s warning comes as Congress prepares to return with a full plate of difficult issues to be resolved in a very few days. These include deciding the ultimate fate of the bipartisan infrastructure package, the $3.5 trillion reconciliation package and measures to protect voting and abortion rights – the last of these still in the very early discussion stages.
Then there’s the matter of emergency funding for natural disaster relief and the estimated $6.4 billion cost of resettling tens of thousands of Afghan refugees.
On top of this, a showdown between the Democratic Congressional leadership and Republicans over the debt limit seems almost inevitable.
Senate Republican Leader Mitch McConnell has already said he’d move to block any short term continuing resolution to fund the government if it includes a debt limit increase.
Yellen noted that in recent years, Congress has been able to address the debt limit “through regular order” and “with broad bipartisan support.”
“I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible,” she said.
“We have learned from past debt limit impasses that waiting until the last minute to suspend or
increase the debt limit can cause serious harm to business and consumer confidence, raise short term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” she continued.
“A delay that calls into question the federal government’s ability to meet all its obligations would
likely cause irreparable damage to the U.S. economy and global financial markets,” Yellen said.
“At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk.”
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