Janet Yellen says Treasury can pay US bills to avoid default as GOP waives debt ceiling
- Janet Yellen has said the Treasury is ready to pay the country’s bills from August 2.
- Mitch McConnell opposed raising the debt ceiling without political concessions.
- Yellen said even the threat of default could seriously damage the U.S. economy.
Treasury Secretary Janet Yellen on Friday sent a letter to Congress urging lawmakers to renew the federal government’s ability to repay its debt before a major deadline, warning that failure to do so in a timely manner could cause significant damage to the federal government. average citizens and economic recovery.
Republicans led by Senate Minority Leader Mitch McConnell have been reluctant to raise the debt ceiling without guaranteeing spending cuts from Democrats. He suggested earlier this week that Democrats should do it themselves without GOP support.
In the letter, Yellen said the United States will hit its statutory debt limit on August 1. The next day, she said, the Treasury is ready to take “some extra extraordinary steps” to pay the country’s unpaid bills and avoid a default that could reverberate. the global economy.
“Failure to meet these obligations would cause irreparable damage to the US economy and the livelihoods of all Americans,” Yellen wrote to House Speaker Nancy Pelosi. She noted that raising the debt ceiling does not encourage increased federal spending, it only allows the government to pay what it already owes.
Yellen pointed to the damage that even the threat of default could have on the economy. She cited a 2011 showdown between President Barack Obama and House Republicans that led to the very first downgrade of US debt. Yellen also said it was difficult to predict when the Treasury would exhaust its ability to pay U.S. bills on its own.
On Wednesday, the non-partisan Congressional Budget Office predicted the department would run out of cash in October or November.
The Republican opposition is hardening now that President Joe Biden sits in the White House. In July 2019, Republicans voted to suspend the borrowing limit for two years under President Donald Trump.
A federal government default could precipitate a chain reaction of liquidity shortages, starting with U.S. bondholders, including individuals, businesses and foreign governments. Democrats insisted this week that they would not allow the GOP to use the debt ceiling as a political weapon.
“We’re going to run our own business,” Senator Brian Schatz of Hawaii, co-author of a bill to end the debt ceiling, told Insider on Wednesday. “This is something the Hill freaks out about every year. We won’t negotiate about it, we won’t concede, and we will be sure to do our job.”
The Biden administration pushed lawmakers to raise the debt ceiling before the August 2 deadline.
“We certainly expect Congress to act in a bipartisan fashion as it did three times under the previous administration to raise the debt ceiling,” Jen Psaki, House press secretary, said on Friday. White.