Janet Yellen, Treasury Secretary, wrote a letter to Congress urging Congress to renew the federal government’s ability to repay its debts before a significant deadline. She warned that failure to do so could cause major economic damage and harm to the average person.
Senate Minority Leader Mitch McConnell and Republicans are stifling efforts to raise the debt limit while ensuring that Democrats don’t get spending cuts. He suggested earlier in the week that Democrats would need to raise the debt limit on their own, with no support from Republicans.
In the letter, Yellen stated that the US would reach its statutory debt limit by August 1. She stated that Treasury was ready to take “certain exceptional measures” to pay outstanding bills and prevent defaults from affecting the global economy.
“Failing to meet these obligations would cause irreparable damage to the economy, the livelihoods and all Americans,” Yellen wrote to Nancy Pelosi on Friday. She pointed out that raising the debt limit doesn’t encourage more federal spending. It only authorizes the government for what it owes.
Yellen highlighted the economic damage even the threat to default could cause. She pointed to the 2011 fight between Obama and House Republicans, which led to the first ever credit downgrade for US debt. Yellen said that it was difficult to predict when Treasury will be unable to pay the US’s bills.
The nonpartisan Congressional Budget Office predicted that Treasury would run out of cash in October or November on Wednesday.
Now that President Joe Biden is in the White House, the Republican opposition is becoming more stout. They voted in July 2019 to suspend the borrowing limit for two-years under President Donald Trump.
A federal default could lead to a chain reaction that causes cash shortages. This could start with US bondholders. These include individuals, businesses and foreign governments. The Democrats insist this week that they won’t let the GOP use the debt ceiling to make political points.
“We’ll manage our business,” said Sen. Brian Schatz, Hawaii, cosponsor of a bill that would abolish the debt ceiling. This is something Hill freaks about every year. We won’t negotiate over it, and we won’t concede anything.
The Biden administration is pushing legislators to increase the debt ceiling before the August 2 deadline.
Jen Psaki, White House Press Secretary, stated Friday that Congress should act in a bipartisan fashion as they did under the previous administration to increase the debt limit.