The Treasury Department alerted Congress that the United States is expected to reach its debt limit on January 19. Secretary Janet Yellen sent a letter to House and Senate leaders informing them that the country may have to resort to "extraordinary measures" to avoid going into default.
Debt Limit Letter to Congress McCarthy
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Some of the measures would include delaying payments to federal employees' retirement plans.
Yellen stated that she does not know how long they will sustain the measures to continue paying the Administration's obligations, but said that "extraordinary measures are unlikely to run out before early June."
"Irreparable damage to the economy”
The Secretary assured that these actions will be put in place until Congress passes legislation to raise the $31.4 trillion debt limit or suspend it again for a period of time. But she warned that it is "critical that Congress act in a timely manner."
Failure to meet the government's obligations would cause irreparable damage to the U.S. economy, the livelihoods of all Americans and global financial stability.
The debt ceiling debate could trigger a political showdown between Republican lawmakers, who now control the House, and want to cut spending
"overreach" by the Biden Administration and Democratic lawmakers, who had complete control of Congress for the past several years.
In the letter, Yellen referenced the debt limit impasse during Barack Obama's presidency, when the GOP had also just won a majority in the House:
In the past, even threats that the U.S. government might default on its obligations have caused real damage, including the only credit downgrade in our nation's history in 2011.
Credit will not be "held captive” by Republicans
The White House insisted that it will not allow the nation’s credit to be "held captive” to the Republicans. Concessions made by new House Speaker Kevin McCarthy raise doubts about whether they will be able to reach a deal. White House spokeswoman Karine Jean-Pierre said:
We have seen Republicans and Democrats come together to address this problem (...) It is one of the basic points that Congress has to deal with and it must be done without conditions.
McCarthy said Republicans will agree to raise the debt limit only in exchange for budget cuts in spending they consider "unsustainable." Other House leaders say they would only support raising the legal ceiling if doing so ensures a spending overhaul.
