Treasury Secretary Says U.S. Will Hit Debt Limit Next Week, Will Take ‘Extraordinary Measures’ to Avoid Default
Treasury Secretary Janet Yellen said the U.S. will hit its debt limit on January 19, at which point the Treasury Department will take “extraordinary measures” to avoid default.
She called on Congress to raise the debt ceiling as soon as possible, with the government on track to max out on its $31.4 trillion borrowing authority next week. Without intervention, the government could be left unable to pay its bills by June.
“It is unlikely that cash and extraordinary measures will be exhausted before early June,” she wrote in a letter to House Speaker Kevin McCarthy (R., Calif.) Extraordinary measures include delaying some payments, including contributions to federal employees’ retirement plans, to free up funds for essential payments such as those for Social Security and debt instruments.
The debt limit is the total amount of money the U.S. government is allowed legally to borrow to pay for its existing obligations, “including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments,” the treasury secretary noted.
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” Yellen wrote.
“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” she said. “Indeed, in the past, even threats that the U.S. government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”
It is likely to prove difficult for Congress to hammer out a deal to raise the debt limit, as Republicans control the House, while Democrats control the Senate.
House Majority Leader Steve Scalise (R., La.) said earlier this week the U.S. must curb its spending, just as a person with maxed-out credit cards would.
“At the same time you’re dealing with the debt limit, you’re also putting mechanisms in place so that you don’t keep maxing it out, because if the limit gets raised, you don’t go to the store the next day and just max it out again,” Scalise told reporters.
“You start figuring out how to control the spending problem. And this has been going on for way too long. And we’re going to confront this,” he added.
Yellen noted in her letter that “increasing or suspending the debt limit does not authorize new spending commitments or cost taxpayers money.”
“It simply allows the government to finance existing legal obligations that Congresses and Presidents of both parties have made in the past,” she added.
