Treasury Secretary Warns Congress U.S. Will Hit Debt Ceiling Within a Week
Treasury Security Janet Yellen It is predicted that the United States will reach $31.4 trillion. Debt According to a letter she sent Friday to congressional leaders, the borrowing limit will be met by next week.
In a letter (pdf) to House Speaker Kevin McCarthy (R-Calif.), Yellen wrote that according to projections, the country will hit the debt ceiling by Jan. 19. If Congress fails to act to increase the borrowing limit by January 19, the Treasury would be required to take action. “certain extraordinary measures” To avoid default on its obligations.
Measures that could be implemented by the Treasury Department include temporarily redeeming existing and suspending new investments of the Postal Service Retiree Health Benefits Fund as well as the Civil Service, Retirement, and Disability Fund. The Department would also suspend investment into the Government Securities Investment Fund of the Federal Employees Retirement System Thrift Savings Plan, she said.
“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,” In a letter, she stated that it will be triggering discussions and new proposals within Congress about whether to increase the debt limit. Some Republican members of Congress said that they would support a bill to increase the debt limit in order to pass spending cuts.
Yellen stated that while the Treasury cannot predict the time it will take for the federal government’s obligations to be paid, she acknowledged this. “it is unlikely that cash and extraordinary measures will be exhausted before early June.”
Treasury data on Wednesday showed that the U.S. Federal Debt was $78 billion less than the limit. The Treasury also had a cash reserve of $346.4 Billion. On Thursday, the department reported that it had a $85 Billion December deficit. Revenues declined and outlays increased, particularly for debt interest.
“It is therefore critical that Congress act in a timely manner to increase or suspend the debt limit. 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,” McCarthy was also addressed by Yellen. Similar letters were sent out to House and Senate leaders.
What does it mean?
McCarthy and other House Republicans top officials have indicated that McCarthy would tie spending cuts to debt ceiling actions, though these measures may not be passed in the Senate, where Democrats control the majority.
“If you’re going to ask for an increase in the limit, at some point in time, you’ve got to sit down and say why are we hitting the limit? Why are we maxing out the credit card?” Steve Scalise (R.La.), House Majority leader This week, Scalise told reporters.
Washington could be forced to stop borrowing entirely by mid-year and solely rely on tax revenues to pay its bills. Washington could start to default on payments to creditors, citizens, and both, as Treasury borrows around 20 cents for each dollar it spends.
Yellen and other policy specialists have called for Washington to remove the limit, claiming it is a bureaucratic stamp that impedes decisions being made. However, the debt ceiling is supported by Democratic and Republican lawmakers alike and both have used it as leverage when their party doesn’t control the White House, making it unlikely to be eliminated.
“REPUBLICANS CAN GET ALMOST EVERYTHING BACK … BY SIMPLY PLAYING TOUGH IN THE UPCOMING DEBT CEILING NEGOTIATIONS,” Truth Social was written by Donald Trump, former President.
After Yellen’s letter was made public, White House press secretary Karine Jean-Pierre told reporters that the debt limit should be raised without any conditions.
“It should be done in a bipartisan way. And it should be done without conditions. That is important here,” Jean-Pierre said Friday.
Some analysts have proposed that the Treasury can bypass the crisis by minting a multitrillion-dollar platinum coin and putting it in the government’s account, an idea widely viewed as an outlandish gimmick. Others claim that the U.S. Constitution violates the debt ceiling. A legal challenge could follow if the Biden administration used that argument.
House Republicans were able to use the debt ceiling in 2011 to force President Barack Obama to limit discretionary spending. The spending caps remained in place for the majority of the remainder of the decade.
Some investors have begun to prepare for the outcome of the battle over the debt ceiling.
“The debt limit is going to be a problem,” In a Monday report, economists from Goldman Sachs stated that the economy was in good shape. “Fiscal deadlines will pose a greater risk this year than they have for a decade.”
This report was contributed by Reuters
Breaking News Reporter
Jack Phillips is a Senior Reporter for The Epoch Times. He is based out of New York. He reports on breaking news.
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