On Friday, Treasury Secretary Janet Yellen wrote a letter to congressional leaders warning that the U.S. would hit its debt limit on January 19 and encouraged Congress to “act promptly to protect the full faith and credit of the United States,” CNBC reported.
Yellen sent the letter to House Speaker Kevin McCarthy (R-Calif.), House Minority Leader Hakeem Jeffries (D-N.Y.), Senate Majority Leader Chuck Schumer (D-N.Y.), and Senate Minority Leader Mitch McConnell (R-Ky.).
The treasury secretary stated that the department would need to take “extraordinary measures” to prevent default once the debt limit is reached next week.
In January, the Treasury plans to redeem existing and suspend new investments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund, according to Yellen. Additionally, she stated that the department would suspend reinvestment of the Government Securities Investment Fund of the Federal Employees Retirement System Thrift Savings Plan.
“Yet the use of extraordinary measures enables the government to meet its obligations for only a limited amount of time,” Yellen warned. “It is therefore critical that Congress act in a timely manner to increase or suspend the debt limit.”
According to Yellen, while it is unclear how long the emergency measures will last, they should give Congress until June to decide to either raise or suspend the nation’s current $31.4 trillion debt limit.
Yellen argued that failure to do so would result in “irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.”
While the United States has never gone into default, Yellen contended that “even threats that the U.S. government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”
Agreeing to increase or suspend the borrowing limit would not permit additional spending commitments, Yellen added.
With a Republican majority in the House, the GOP has an opportunity to negotiate spending cuts as part of a debt limit deal.
A White House official told CNBC that after the upcoming April tax deadline, the Biden administration plans to enter into negotiations with Congress regarding the debt limit. However, during a Friday White House press briefing, Karine Jean-Pierre contradicted that official’s statement by saying the Biden administration “will not be doing any negotiation over the debt ceiling.”
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