US debt default could occur in October, Yellen warns
WASHINGTON – The United States could default on its debt in October if Congress does not take action to raise or suspend the debt limit, Treasury Secretary Janet L. Yellen warned Wednesday.
The “extraordinary measures” the Treasury Department has used to temporarily fund the government since Aug. 1 will run out next month, Ms. Yellen said in a letter to lawmakers. She added that the exact timing was uncertain, but the time to avert economic disaster was running out.
“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 our history,” Ms. Yellen wrote.
To delay a default, the Treasury last month suspended investments in the Civil Service Retirement and Disability Fund, the Postal Service Retirees Health Benefit Fund and the Government Securities Investment Fund. Federal Employee Retirement System Savings Plan.
The breakdown of pandemic relief payments this year and the uncertainty over inbound tax payments this month have made it harder than usual to predict when funds will run out. Ms. Yellen said a default would cause “irreparable damage” to the US economy and global financial markets, and even approaching default could be damaging.
“We have learned from past deadlocks around debt limits 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. ,” she wrote.
Democratic leaders have insisted for months that Republicans join them in raising the debt ceiling, saying the government has reached its latest debt limit due to spending and tax cuts by the Trump administration , what President Nancy Pelosi of California on Wednesday called “the Trump credit card.”
But Sen. Mitch McConnell of Kentucky, the Republican leader, has equally insisted that he will prevent Senate Republicans from helping Democrats on the matter. Democrats could try to tie the increase to measures such as an emergency spending bill to pay for relief and reconstruction after Hurricane Ida, wildfires and summer heat waves – the daring senators of Louisiana and the western states to vote no.
The showdown again put the parties in a pool game, resulting in default and a potential economic crisis.
Ms Pelosi, in her weekly press conference on Wednesday, insisted that Democrats will not include a statutory increase in the government’s borrowing power in a budget bill being drafted this month. This bill, under complicated fiscal rules, could pass without Republican votes in the Senate.
Instead, Democratic leaders will dare Senate Republicans to filibuster a bill that raises the debt ceiling.
“We Democrats supported lifting the debt ceiling” during the Trump administration, she said, “because it was the responsible thing to do.” She added: “I hope the Republicans act in an equally responsible manner.”
Democrats have several options they are considering. The government will run out of operating funds at the end of the month, so an increase in the debt ceiling could be paired with an interim spending measure – meaning a Republican obstruction would not only jeopardize full faith and government credit, but could also shut down the government. .
Democrats could also tie him to a major infrastructure bill that has passed the Senate with bipartisan support and is expected to get a vote in the House by September 27.