Janet Yellen called on the US Congress to expedite a new debt ceiling. The US Treasury Secretary warned that if the government in Washington could no longer service its debt, the economy and Americans’ livelihoods would be threatened with “irreparable damage.”
Yellen said in a letter to top Democrats and Republicans on July 30 that her department will have to stop selling securities from the State and Local Government Chain (SLGS). If Congress does not suspend or raise the debt ceiling by August 2, then the Treasury will have to start “taking some additional extraordinary action.” Otherwise, the United States will no longer be able to fulfill its obligations. The former Federal Reserve chief said that on October 1 alone, the $150 billion in legal payments will be due.
Threatening a new “government shutdown”
With bridging measures, Yellen could only avoid a short-lived “government shutdown,” as many federal authorities have to halt operations due to lack of funds. This has happened three times in the past decade, most recently in early 2018/19.
The debt ceiling controversy erupted again in Congress
The independent Congressional Budget Office (CBO) estimates that without a new debt ceiling, the US government will likely run out of money in October or November. Without a deal, the ceiling would return to its 2019 level in August: $22 trillion — plus debt accumulated since then of about $6.5 trillion, so the new ceiling would be about $28.5 trillion.
In the past, Republicans and Democrats have always agreed to raise the debt ceiling — albeit often after a twitch and several rounds of negotiations. Democrats led by US President Joe Biden control the House of Representatives, but in the Senate they rely on Republican support.
wa / bru (dpa, rtr)
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