secretary of the treasury Janet YellenJanet Louise Yellen Africa Not Deserving Last Place In Vaccine Race Biden Says Wages Will Need To Raise To Solve Recruitment Problems Only 6.5% Of Rent Aid Has Reached Tenants And Landlords: Treasure PLUS on Friday urged congressional leaders to raise the federal debt limit as soon as possible or risk “irreparable damage to the US economy and the livelihoods of all Americans.”
In a friday letter, Yellen warned that the Treasury Department cannot predict how long it could avoid a potentially catastrophic national debt default if Congress does not raise or suspend the debt ceiling by August 1 .
“In recent years, Congress has addressed the debt limit through regular ordinances, with broad bipartisan support,” Yellen wrote. “I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible.”
The debt ceiling does not increase or decrease government spending, but sets a ceiling on the amount of debt the government can incur while paying off obligations already approved by Congress and the President. A two-year deal to suspend the debt limit expires on July 31, and Congress is unlikely to reach another deal to lift it before that date.
Republican Senate leaders said this week that there would not be enough Republicans to support an increase or suspension of the debt ceiling if it were not linked to debt reduction measures. Democrats have refused the demands, arguing that the GOP is holding the economy hostage to partisan demands.
The Treasury Department has taken extraordinary steps to avoid defaults in previous debt ceiling confrontations. But Yellen warned on Friday that the department was unable to predict when those efforts would run out due to the hardships created by the coronavirus pandemic.
While the Congressional Budget Office (CBO) estimated this week that the Treasury likely has until October or November before reaching the end of the road, Yellen said that could happen soon after Congress returns. holidays in mid-September.
Yellen also warned lawmakers that the threat of default alone could hurt the country’s financial position. She cited the rating agencies’ decision to downgrade the US creditworthiness for the first and so far the only time during the 2011 debt ceiling deadlock.
“This is why no President or Treasury Secretary of either party has ever tolerated even the suggestion of a breach of a US obligation,” Yellen wrote.
Yellen sent the letter to the President Nancy PelosiNancy PelosiDemocrats move forward with Jan. 6 inquiry, eyeing new GOP reinforcements GOP banks polish the mark with Pelosi veto Meghan McCain on Pelosi, fights McCarthy: “I think they’re all bad” MORE (D-California) and House Minority Leader Kevin mccarthyKevin McCarthyDemocrats move forward with Jan. 6 inquiry, eyeing new GOP reinforcements GOP banks polish the mark with Pelosi veto Meghan McCain on Pelosi, fights McCarthy: “I think they’re all bad” MORE (R-California); Majority leader in the Senate Charles SchumerChuck Schumer administration Biden stokes frustration with Canada Schumer blames McCarthy for picking people who “supported the big lie” for Biden’s late January 6 obstruction decision: a semblance of principle at work (DN.Y.) and leader of the minority Mitch mcconnellAddison (Mitch) Mitchell McConnell SE Cupp: “Politicization of science and health security has undoubtedly cost lives” Poll: Possible Sununu-Hassan clash in NH is deadlock Business groups urge lawmakers to s ” stick to the bipartite agreement on PLUS infrastructure (R-Ky.); and the leading Democrats and Republicans on the Senate Finance and House Ways and Means committees.
The historic strength and stability of the United States has made the United States dollar the global reserve currency and United States Treasury bonds one of the safest assets available in world markets. A default on the national debt could overturn trillions of dollars in global trade and financial holdings backed by full U.S. confidence and credit, triggering a financial crisis.
Federal Reserve Chairman Jerome Powell also warned during the 2019 debt ceiling showdown that the central bank – the United States’ lender of last resort – may not be able to contain damage from a national default.