Yellen warns US could hit debt limit in October


WASHINGTON (AP) – Treasury Secretary Janet Yellen is warning Congress that she will run out of wiggle room to prevent the United States from reaching the government’s borrowing limit in October.

In a letter to congressional leaders on Wednesday, Yellen said she still could not provide a specific date by which she would not be able to maintain government funding, absent Congressional action to increase. the debt limit.

“Based on our best and most recent information, the most likely outcome is that liquidity and extraordinary measures will be exhausted during the month of October,” Yellen wrote.

Yellen said recent measures to lower the debt ceiling had received “broad bipartisan support,” but Republicans said they would oppose a Democrats’ effort to address the debt ceiling adding a provision to an emergency budget bill that Congress must pass before the start of the budget year on October 1. This legislation is necessary to avoid a government shutdown.

Instead, some Republicans have said Democrats should tie an increase in the debt limit to the $ 3.5 trillion infrastructure plan Democrats hope to pass without Republican votes, using a process known as of “budget reconciliation”.

But House Speaker Nancy Pelosi said on Wednesday Democrats would not include the debt ceiling increase in the reconciliation measure. She said Democrats had several “options” for raising the debt ceiling, but did not say they were.

She said Democrats support lifting the borrowing limit under Trump “because it’s the responsible thing to do. I hope Republicans act in an equally responsible manner.”

The debt limit is the amount of money Congress allows the Treasury to borrow to run government. When the debt limit was suspended for two years in July 2019, the public debt subject to the limit stood at $ 22 trillion.

When the debt limit was reinstated, the limit was reset to $ 28.4 trillion, the existing debt level. The big leap over the past two years has reflected the massive amounts of support Congress has voted to help individuals and businesses weather a global pandemic.

Yellen used what the law calls “extraordinary measures” which cover a variety of accounting maneuvers Yellen can take to eliminate debt from various government trust funds, including federal workers’ pensions. Once the debt limit deadlock is resolved, funds withdrawn from the trust funds are returned with interest.

Yellen urged Congress to act without delay.

“Once all available measures and available liquidity are fully exhausted, the United States of America would not be able to meet its obligations for the first time in its history,” Yellen said.

While Republicans in Congress have often used the debt limit debate to elicit budget concessions from Democratic presidents, lawmakers have never failed to raise the debt limit or suspend it to allow the government to continue to borrow.

However, in 2011, a budget battle between the Obama administration and the Republicans lasted so long that the Standard & Poor’s rating agency lowered part of the Treasury debt to its AAA rating for the first time in history. .

“We have learned from past deadlocks around the debt limit that waiting until the last minute to suspend or increase the debt limit can seriously damage business and consumer confidence, increase borrowing costs to short term for taxpayers and negatively impact the credit rating of the United States. States, ”Yellen said.

“A delay that calls into question the ability of the federal government to meet all of its obligations would likely cause irreparable damage to the US economy and global financial markets,” she said. “I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible.”

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