Unless the debt ceiling is raised, the US may run out of money on October 18th, according to Yellen.
Treasury Secretary Janet Yellen warned Tuesday that the US government will run out of money on October 18 unless Congress boosts the federal borrowing cap.
Treasury reserves would “soon decrease” after that date, and “it is doubtful whether we could continue to meet all of the nation’s commitments after that date,” she wrote to congressional leaders.
Yellen cautioned that if Congress do not act swiftly, catastrophic consequences will follow, including debt default and the depreciation of the US dollar.
Despite pressing for it under their party’s former president Donald Trump, Republicans in the US Senate have persistently refused to back an extension or suspension of the debt ceiling as the clock ticks down.
The debt limit rise, according to Yellen, is a “shared obligation” that both parties should support.
“It is critical that Congress handle the debt ceiling as soon as possible. If it does not, the United States will default for the first time in its history,” Yellen warned the Senate Banking Committee.
The government would be unable to pay public employees’ salaries, send payments to pensioners, or service the nation’s debt without an increase.
She also stated that it would “undermine confidence in the dollar as a reserve currency” and a “safe haven asset.”
“This is a manufactured crisis that we have placed on a country that has been through a really terrible period and is on the mend.”
Despite dire warnings from business groups and others, Senate Republicans vetoed a House-passed deal to extend the debt ceiling until December 2022 and avoid a government shutdown late Monday, forcing Democrats to forge their own path forward.
Lawmakers face a tighter deadline to fund the government once the current fiscal year ends on Thursday.
Rumors abound at the Capitol that a House vote on extending the debt ceiling will take place on Tuesday, but that would still face Republican resistance in the Senate’s evenly divided chamber, where Democrats will struggle to find 60 votes.
Senate Majority Leader Chuck Schumer announced on Tuesday that he would file a bill later that day to seek a borrowing increase by a simple majority, as Republicans have done in the past, allowing Democrats to act alone.
Schumer challenged the opposition, which he referred to as “the official party of default, the party that says America doesn’t pay its bills,” to accept this solution.
Mitch McConnell, the Senate Republican leader, has used the debt ceiling as a political hammer to oppose President Joe Biden’s spending plans. Brief News from Washington Newsday.