Yellen Warns Congress About Failure to Act on Debt Limit

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Politics|Janet Yellen warns Congress that failing to enactment connected the indebtedness bounds risks ‘irreparable’ economical harm.

Treasury Secretary Janet L. Yellen astatine  the White House successful  May.
Credit...Erin Scott for The New York Times

Alan Rappeport

  • July 23, 2021, 1:52 p.m. ET

Treasury Secretary Janet L. Yellen warned Congress connected Friday that the United States system faces “irreparable harm” if lawmakers neglect to rise oregon suspend the nation’s borrowing headdress and that the Treasury Department would statesman taking “extraordinary measures” to debar breaching the alleged indebtedness limit.

In a missive to Congress, Ms. Yellen said that the nation’s indebtedness volition deed its statutory bounds connected Aug. 1 and that it is imaginable that soon aft lawmakers instrumentality from their August recess the United States could look the dire imaginable of defaulting connected its obligations. Urging Congress to act, she recalled that successful 2011 the menace of default caused nation’s recognition standing to beryllium downgraded.

“Even the menace of failing to conscionable those obligations has caused detrimental impacts successful the past, including the sole recognition standing downgrade successful the past of the federation successful 2011,” Ms. Yellen wrote. “This is wherefore nary President oregon Treasury Secretary of either enactment has ever countenanced adjacent the proposition of a default connected immoderate work of the United States.”

Ms. Yellen besides warned that the pandemic had made it hard for Treasury to foretell however agelong it tin hold breaching the indebtedness ceiling fixed uncertainty astir the timing of authorities payments and taxation receipts.

The Treasury often takes what it calls “extraordinary measures” to debar breaching the indebtedness limit, which is simply a headdress connected however overmuch the authorities tin borrow. Those measures see suspending investments of the Exchange Stabilization Fund and suspending the issuance of caller securities for the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.

The C.B.O. estimated this week that the Treasury Department could tally retired of currency by October oregon November.

Ms. Yellen noted that the authorities is required to marque a ample outgo of $150 cardinal for a Department of Defense-related status and wellness attraction concern connected Oct. 1, which volition deplete its currency reserves.

Brinkmanship implicit the indebtedness bounds has go communal successful Washington. Republicans person traditionally resisted raising oregon suspending the indebtedness bounds erstwhile Democrats power the White House. They backed a two-year suspension of the indebtedness bounds successful 2019 arsenic portion of a spending statement with Democrats portion erstwhile President Donald J. Trump was successful office.

Senator Mitch McConnell, the number leader, suggested this week that Republican senators would not backmost a indebtedness ceiling summation and that Democrats would person to woody with it connected their own.

White House officials said that they stay hopeful that lawmakers volition enactment unneurotic to avert a indebtedness bounds crisis.

“We surely expect Congress to enactment successful a bipartisan mode arsenic they did 3 times nether the anterior medication to rise the indebtedness limit,” Jen Psaki, White House property secretary, said connected Friday.

Ms. Yellen said successful her missive that suspending oregon expanding the indebtedness bounds does not authorize aboriginal spending but, successful fact, allows the Treasury Department to wage for expenses that were antecedently approved by Congress.

“The existent level of indebtedness reflects the cumulative effect of each anterior spending and taxation decisions, which person been made by Administrations and Congresses of some parties implicit time,” Ms. Yellen wrote.

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