Yellen warns US Congress not to hit debt limit on January 19th

Yellen warns US Congress not to hit debt limit on January 19th

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  • January 13, 2023
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Treasury Secretary Janet Yellen on Friday warned Congressional leaders that the United States is expected to hit the debt ceiling on Jan. 19 and urged them to raise the debt ceiling as soon as possible. She said the Treasury Department will take the necessary steps to continue paying the country’s bills, but without action from Congress, the United States could default as soon as June.

“I am writing to inform you that beginning Thursday, January 19, 2023, the outstanding debt of the United States is expected to reach the legal limit,” Yellen wrote in a letter to House Speaker Kevin McCarthy Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, and House Minority Leader Hakeem Jeffries. “Once the limit is reached, the Treasury Department must take certain exceptional measures to prevent the United States from defaulting on its obligations.”

This comes after Congress last raised the debt ceiling to more than $31.3 trillion in December 2021. At that time, the Democrats controlled both the House of Representatives and the Senate. But with the new Congress sworn in earlier this month and the House of Representatives under Republican control, it’s unclear whether lawmakers will be able to reach a bipartisan compromise. The last time the House of Representatives voted to raise the debt ceiling, all but one Republican voted against.

Failure to raise the debt limit would result in the first US loan default in history.

It “would irreparably damage the US economy, the livelihoods of all Americans, and global financial stability,” Yellen wrote.

Starting this month, Yellen said the Treasury Department will take what it calls “extraordinary measures” to keep paying the bills. These include the withdrawal and suspension of new investments in the civil servants’ old-age and disability funds and the postal service pensioners’ health insurance funds, as well as the suspension of the reinvestment of the state securities investment fund of the savings bank for federal civil servants. After the debt ceiling is resolved, the funds would be made complete.

Extraordinary measures have their limits, however, and Yellen predicted that these measures would only delay the default until some point in June.

Yellen said it was critical for Congress to act in time to either raise or suspend the debt ceiling.

“The period during which extraordinary measures may last is subject to significant uncertainty due to a variety of factors, including the challenges of projecting U.S. government payments and revenues months into the future,” Yellen wrote. “While the Treasury Department is unable at this time to estimate how long extraordinary measures will allow us to continue to meet government obligations, it is unlikely that cash and extraordinary measures will be exhausted before early June.”

Raising or suspending the debt limit does not authorize new spending but allows the government to make payments on existing debt accumulated under multiple administrations. While the debt limit was last raised under President Biden in 2021, Congress has voted to raise the debt limit under both Democratic and Republican administrations, including three times under President Trump.

McCarthy this week compared the debt limit to a kid with a maxed-out credit card who endlessly increases the limit. He said Congress needs to address the country’s wasteful spending.

He didn’t rule out raising the debt limit, instead suggesting that the Trump-Pelosi deal in 2019 could offer a way forward — with an agreement to limit spending.

“I was having a very good conversation with the president when he called me, and I told him I’d like to sit down with him early and work through these challenges,” McCarthy said at a Thursday news conference.

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Sarah Ewall-Wice

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