Yellen Takes Emergency Debt Limit Measures to Congress | WIVT
WASHINGTON (AP) – Treasury Secretary Janet Yellen told Congress on Friday she would start taking emergency action next week to prevent the government from an unprecedented default on the national debt, warning that a default would cause “irreparable harm to the American economy and the livelihoods of all Americans.”
In a letter to House and Senate leaders, Yellen said his actions would buy time until Congress can pass legislation to raise the debt ceiling or suspend it again for a period of time.
The debt limit has been suspended for the past two years but will come back into effect on July 31. Total debt subject to the limit currently stands at $ 28.4 trillion.
Yellen said his first decision on July 30 would be to suspend the sale of state and local securities, which are used by some local jurisdictions to meet some of their financing needs, but increase the level of debt held by the government. federal.
If Congress did not act to raise the debt limit or suspend it by August 2, Yellen said it would take “some additional extraordinary steps to prevent the United States from defaulting on its obligations. “.
In his letter, Yellen noted that even the threat of a default – something the United States never did – triggered the country’s first-ever credit downgrade. It happened during a standoff between Republicans in Congress and the Obama administration in 2011, when the Standard & Poor’s rating agency downgraded its rating on some US debt.
“This is why no President or Treasury Secretary of either party has ever tolerated even the suggestion of a breach of a US obligation,” Yellen wrote.
However, Senate Minority Leader Mitch McConnell, R-Ky., Threatened this week that all Republican senators would vote against extending the government’s borrowing power. He cited objections to President Joe Biden’s plans to increase domestic spending and raise taxes for the rich.
If that happened, Senate Democrats wouldn’t have the 10 GOP supporters they would need to overcome Republican obstruction or delaying tactics, and push that language through the Senate to 50-50 with 60 votes.
Democrats have yet to decide on a legislative strategy to deal with a debt limit deadlock.
But Yellen’s letter could prompt them to include a provision extending the debt limit in a bill that Congress will have to approve by October 1 to prevent a government shutdown that day. Recurrent expense bills funding federal agencies for the fiscal year beginning Oct. 1 are unlikely to have been promulgated by then.
This tactic would dare Republicans to block a bill that, if defeated, could result in both a federal shutdown and default. Most politicians would hesitate to be blamed for such events, especially as an election year approaches.
Responding to Mitchell’s comments this week, Senate Majority Leader Chuck Schumer, DN.Y., called them “shameless, cynical and utterly political.”
Yellen’s reference to using “extraordinary measures” to allow the government to continue borrowing to meet its debt service obligations and to make payments on benefits such as Social Security refers to to a variety of accounting maneuvers used by former Treasury secretaries.
These include the divestment of funds from accounts that pay retirement benefits to civil servants. Once the debt ceiling is exceeded, funds that have been divested from various public accounts are replaced.
Yellen said the unusual circumstances surrounding the government’s response to the coronavirus pandemic made it difficult to predict when it will run out of wiggle room. She said that in certain scenarios, her ability to continue borrowing could end shortly after Congress returns from its August vacation.
She said a particular challenge would arise on October 1, when government resources are expected to decline by around $ 150 billion due to large mandatory payments, including an investment required for pension support and related health care. at the Ministry of Defense.
White House press secretary Jen Psaki said on Friday that the US government had never authorized a default, which she said would be a “catastrophic event”.
“We expect Congress to act quickly to increase or suspend” the debt limit and “protect the full confidence and credit of the United States,” Psaki told reporters.
White House PA reporter Josh Boak contributed to this report.