x

Economy

Yellen Warns US May Hit Debt Limit in October

September 8, 2021

WASHINGTON — Treasury Secretary Janet Yellen is warning Congress that she will run out of maneuvering room to prevent the U.S. from broaching the government's borrowing limit in October. 

In a letter to congressional leaders Wednesday, Yellen said that she still could not provide a specific date for when she will be unable to keep the government funded, absent action by Congress to raise the debt limit.

"Based on our best and most recent information, the most likely outcome is that cash and extraordinary measures will be exhausted during the month of October," Yellen wrote.

Yellen said recent measures to address the debt limit had enjoyed "broad bipartisan support," But Republicans have said they will oppose an effort by Democrats to deal with the debt limit by attaching a provision to an emergency budget bill that Congress will need to pass before the start of the budget year on Oct. 1. That legislation is needed to avoid a government shutdown.

Instead, some Republicans have said Democrats should attach a debt limit increase to the $3.5 trillion infrastructure plan that Democrats are hoping to pass without Republican votes, using a process known as "budget reconciliation."

But House Speaker Nancy Pelosi said Wednesday that Democrats will not be putting the debt limit increase in the reconciliation measure. She said Democrats have several "options" for raising the debt ceiling but she did not specify for that they were.

She said Democrats supported lifting the borrowing limit under Trump "because it's the responsible thing to do. I would hope that the Republicans would act in a similarly responsible way." 

The debt limit is the amount of money Congress allows Treasury to borrow to keep the government running. When the debt limit was suspended for two years in July 2019, the public debt subject to the limit stood at $22 trillion.

When the debt limit was re-instated, the limit reset to $28.4 trillion, the existing level of debt. The big jump in the past two years reflected the massive amounts of support Congress voted to approved to help individuals and businesses get through a global pandemic.

Yellen has been using what is termed in law "extraordinary measures" which cover a variety of bookkeeping maneuvers Yellen can take to remove debt from various government trust funds including federal workers' pensions. Once the debt limit impasse is resolved, the funds removed from the trust funds is restored with interest.

Yellen urged Congress to act without delay.

"Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligations for the first time in our history," Yellen said.

While Republicans in Congress have often used the debt limit debate to extract budget concessions from Democratic presidents, lawmakers have never failed to raise the debt limit or suspend it to allow the government to keep borrowing.

However, in 2011, a budget battle between the Obama administration and Republicans dragged on for so long that the credit rating agency Standard & Poor's downgraded a portion of Treasury debt from its AAA rating for the first time in history.

"We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and and consumer confidence, raise short-term borrowing costs for taxpayers and negatively impact the credit rating of the United States," Yellen said.

"A delay that calls into question the federal government's ability to meet all of its obligations would likely cause irreparable damage to the U.S. economy and global financial markets," she said. "I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible."

RELATED

Inflation has hit most of the economy, but that’s hardly the case with airfare.

Top Stories

Columnists

A pregnant woman was driving in the HOV lane near Dallas.

General News

NEW YORK – Meropi Kyriacou, the new Principal of The Cathedral School in Manhattan, was honored as The National Herald’s Educator of the Year.

Video

Firefighters Seek to Corral Massive Texas Wildfires Before Weekend of Higher Temperatures and Winds

CANADIAN, Texas (AP) — The explosive growth of the second-largest wildfire in Texas history slowed as winds and temperatures dipped but the massive blaze was still untamed and threatening more death and destruction.

MOSCOW (AP) — Russian President Vladimir Putin vowed Thursday to fulfill Moscow’s goals in Ukraine and sternly warned the West against deeper involvement in the fighting, saying that such a move is fraught with the risk of a global nuclear conflict.

ATHENS - The greatest problem in Greece following the restoration of democracy in Greece is the missed opportunities, Prime Minister Kyriakos Mitsotakis said on Thursday evening in a discussion at the "Metapolitefsi: 50 Years Later" conference, which focuses on the fifth-decade anniversary of the restoration of democracy in Greece.

NEW YORK – The Greek Orthodox Folk Dance & Choral Festival Ministry of the Metropolis of San Francisco is dedicated, through Orthodox Christian Fellowship and committed leadership, to promoting, encouraging and perpetuating the Orthodox faith, Greek heritage and culture among individuals, families and communities by expressing it through folk dance, folk art, music and language.

NEW YORK – Greek-American Ellie Falaris Ganelin, gifted musician and Greek Chamber Music Project Director, announced a special replay of a concert to be broadcast on Leap Day, February 29.