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U.S. Treasury Secretary Yellen warns Congress on debt limit

Published 07/23/2021, 12:58 PM
Updated 07/23/2021, 03:05 PM
© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen speaks as she joins White House Press Secretary Jen Psaki for the daily press briefing at the White House in Washington, U.S. May 7, 2021.  REUTERS/Jonathan Ernst

By Doina Chiacu

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen urged lawmakers on Friday to increase or suspend the nation's debt limit as soon as possible and warned that if Congress does not act by Aug. 2 the Treasury Department would need to take "extraordinary measures" to prevent a U.S. default.

In a letter to House of Representatives Speaker Nancy Pelosi, Yellen said that Oct. 1, the first day of the next fiscal year, could be a critical date for the U.S. ability to pay its obligations without debt limit legislation due to large federal outlays scheduled for then.

In the letter, also sent to other congressional leaders from both parties, Yellen said U.S. debt would be at the statutory limit on Aug 1, when a two-year suspension is set to expire.

A partisan fight https://www.reuters.com/world/us/every-time-its-messy-us-again-approaching-debt-ceiling-2021-07-21 over raising the debt ceiling erupted in Congress this week. Republicans have seized upon the debt limit issue to attack Democrats for pushing legislation that they say has led to inflation and escalating public debt.

"Today, Treasury is announcing that it will suspend the sale of State and Local Government Series (SLGS) securities at 12:00 p.m. on July 30, 2021," Yellen wrote.

The suspension of such sales to state and local municipal bond issuers will continue until the debt ceiling is suspended or raised, Yellen said.

"If Congress has not acted to suspend or increase the debt limit by Monday, August 2, 2021, Treasury will need to start taking certain additional extraordinary measures in order to prevent the United States from defaulting on its obligations," Yellen added.

A failure to work out differences among lawmakers over whether government spending cuts should accompany an increase in the statutory debt limit, currently set at $28.5 trillion, could lead to a federal government shutdown - as has happened three times in the past decade - or even a debt default.

White House Press Secretary Jen Psaki told reporters President Joe Biden's administration is not setting a new deadline for congressional action, but Yellen was offering a sense of the timeline for needed action.

"We certainly expect Congress to act in a bipartisan manner, as they did three times under the prior administration, to raise the debt limit," Psaki said.

Yellen's letter said it was unclear how long the Treasury measures would last, citing heightened uncertainty about forecasting payments and revenues due to the COVID-19 pandemic. Yellen said there are scenarios under which Treasury's cash and extraordinary measures to continue borrowing could be exhausted soon after Congress fully returns from its summer recess in mid-September.

"For example, on October 1 alone, cash and extraordinary measures are expected to decrease by about $150 billion due to large mandatory payments, including a Department of Defense-related retirement and healthcare investment," Yellen said.

© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen speaks as she joins White House Press Secretary Jen Psaki for the daily press briefing at the White House in Washington, U.S. May 7, 2021.  REUTERS/Jonathan Ernst

Yellen told Reuters in an interview last week that the Treasury is on track to end July with a $450 billion cash balance, compared to $1.12 trillion at the end of March.

On Wednesday, Treasury reported https://fsapps.fiscal.treasury.gov/dts/files/21072100.pdf a cash balance of $616.3 billion and total debt of $28.44 trillion subject to the federal debt ceiling.

Latest comments

Spend more and more and more
I have a feeling we might see a gong show occur. if no deal is made it would be the perfect way to show that biden and the democrats created this financial mess.
lol
No one want to fix the problem rather kicking the cane down the road.
Hi my dear friends how are you?
Hi my dear friends how are you?
raise debt, liquify usd. the end of us empire
Also, if you are wondering the degree of the bubble we are in, for the first time in US history, the average US household has over 40% of their assets in the stock market. Retail margin holdings are at historic highs, over $800 billion, and personal debt levels are at historic highs (in addition to historic high levels of corporate and government debt). Inflation levels of the USD have never been this high with historically low interest rates, and a government that has been unable to achieve a balanced budget for over 20 years, with $30 trillion+ already in debt and threat of default in a few months of debt ceiling is not raised again. Over the past 90 years, average home price in the US has gone up 100x, and wages have only gone up 25x. The USD has seen over 100% inflation just since 1990, with the US being worth less than half of what it was in 1990. The USD has lost around 10% of its value just in the past 3 years, over 5%+ just in the past 12 months.
When you miss a credit card payment by 1 day: Late payment fee, negative impact on credit score, 25%+ APR, collections/account closure risk. Government unable to achieve balanced budget in 20+ years and hits debt ceiling repeatedly: We are the best! Give us more money and power! Zero interest rates forever! Print more money! Raise debt ceiling! This time it will work!
United States was a great nation. keeping debit under control is a key factor to be powerful and reliable. now united States are collapsing. debt ceiling was created to keep things under control and avoid the decadence we are seeing. roman empire did exactly the same
printing dollar today is the same of silver coin debasement roman empire did in iii century
Fed will print more money doesn’t matter buy calls
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