Yellen warns US Congress must hit debt limit on January 19

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Treasury Secretary Janet Yellen warned congressional leaders on Friday that the United States must hit the debt limit by Jan. 19 and urged them to raise the debt limit as quickly as possible. She said the Treasury Department will begin taking the necessary steps to continue paying the country’s bills, but without congressional action, the United States could default as early as June.

“I am writing to let you know that effective Thursday, January 19, 2023, the outstanding debt of the United States must reach the statutory limit,” Yellen wrote in a letter addressed to Speaker of the House Kevin McCarthy and Leader of the majority in the Senate, Chuck Schumer. , Senate Minority Leader Mitch McConnell and House Minority Leader Hakeem Jeffries. “Once the threshold is reached, the Treasury 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 the House and Senate. But with the new Congress sworn in earlier this month and the House under Republican control, it’s unclear whether lawmakers will be able to reach a bipartisan agreement. The last time the Chamber voted to raise the debt limitall but one Republicans voted against it.

Failure to raise the debt limit would result in the first US credit default in history.

This “would cause irreparable damage to the US 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 redemption and suspension of new investments in the Civil Servant Retirement and Disability Fund and the Postal Service Retirement Health Benefit Fund, as well as the suspension of the reinvestment of the Investment Fund in Government Bonds of the System’s Savings Plan of Retirement for Federal Employees. Once the debt limit is resolved, the funds would be paid in.

Extraordinary measures have their limits, however, and Yellen predicted that such measures would postpone default only until June.

Yellen said it is critical that Congress act in a timely manner to raise or lift the debt limit.

“The length of time that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors, including the challenges of predicting US government payments and receipts months into the future,” Yellen wrote. “While Treasury is unable to provide an estimate of how long the extraordinary measures will allow us to continue to pay government obligations, it is unlikely that the money and extraordinary measures will run out before early June.”

Raising or lifting the debt limit does not authorize new spending, but it does allow the government to make payments on existing debts accumulated by multiple governments. While the debt limit was recently raised under President Biden in 2021, Congress has voted to raise the debt limit under both the Democratic and Republican administrations, including three times under President Trump.

McCarthy this week compared the debt limit to a child with a maxed out credit card and continually increasing the limit. He said Congress needs to deal with unnecessary spending in the country.

He didn’t rule out raising the debt limit, instead suggesting that the 2019 Trump-Pelosi deal could provide a way forward – with a deal to limit spending.

“I had a really good conversation with the president when he called me and told him I wanted to sit down with him early and work through these challenges,” McCarthy said at a news conference on Thursday.

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