Treasury Secretary Janet Yellen warned congressional leaders on Friday that the United States is expected to hit the debt limit on January 19 and urged them to raise the debt limit as soon as possible. She said the Treasury would begin taking the necessary steps to continue paying the country’s bills, but without congressional action, the US could default as soon as June.
“I am writing to inform you that beginning Thursday, January 19, 2023, the debt owed to the United States is expected to reach the legal limit,” Yellen wrote in a letter to House Speaker Kevin McCarthy and Senate Majority Leader Chuck Schumer. and Senate Minority Leader Mitch McConnell and House Minority Leader Hakeem Jeffries. “Once the cap is reached, the Treasury Department will need to begin taking certain extraordinary measures to prevent the United States from defaulting on its obligations.”
This comes after Congress last raised the debt ceiling in December 2021 to more than $31.3 trillion. At the time, Democrats controlled both the House and Senate. But with a new Congress sworn in earlier this month and the House of Representatives under Republican control, it’s unclear whether lawmakers will be able to strike a bipartisan compromise. The last time he was home They voted to raise the debt limitAll but one Republican voted against.
Failure to raise the debt limit will result in the first US credit default in history.
“It would cause irreparable damage to the American economy, the livelihoods of all Americans, and global financial stability,” Yellen wrote.
Starting this month, Yellen said the Treasury Department will begin taking so-called “extraordinary measures” to keep paying the bills. They include the recovery and suspension of new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retired Health Benefit Fund as well as the suspension of reinvestment of the Government Securities Investment Fund for the savings plan into the federal employee retirement system. After the debt limit is resolved, the funds will be full.
However, the extraordinary measures have their limits, and Yellen predicted that these actions would delay default until sometime in June.
Yellen said it is critical that Congress act in a timely manner to either increase or suspend the debt limit.
“The length of time that the unusual measures may continue is subject to significant uncertainty due to a variety of factors, including the challenges of forecasting payments and revenues for the U.S. government in the months ahead,” Yellen wrote. “While the Treasury is not currently able to provide an estimate of how long the extraordinary measures will enable us to continue to pay the government’s obligations, it is unlikely that the funds and extraordinary measures will be exhausted before early June.”
Raising or suspending the debt limit does not authorize new spending, but it does allow the government to make payments on existing debts accumulated under multiple administrations. While the debt limit was most recently 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 child with a credit card maxed out and the limit increased to infinity. He said Congress should address the country’s wasteful spending.
He has not ruled out raising the debt limit, suggesting instead that a deal between Trump and Pelosi in 2019 could provide a way forward — with an agreement to limit spending.
“I had a very good conversation with the president when he called me, and I told him I’d like to sit down with him early on and work through these challenges,” McCarthy said at a news conference Thursday.
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