Congress was in a position to keep away from what consultants say can be a catastrophic financial disaster by elevating the debt restrict in the quick time period final week, however Treasury Secretary Janet Yellen mentioned the current improve in the debt ceiling gives solely a “short reprieve” earlier than the U.S. is set to expire of cash to pay its payments once more.
The Treasury Division might want to use so-called extraordinary measures, corresponding to suspending some securities gross sales and never investing in funds, to ensure the authorities can meet debt obligations via December 3, Yellen mentioned in a letter to congressional leaders Monday. If the U.S. is unable to pay its payments, the nation would go into default for the first time ever.
Final week, the Home handed a invoice to boost the debt restrict by $480 billion, conserving the authorities solvent into early December. It got here after Republicans in the Senate backed off their menace of a filibuster permitting Senate Democrats to go the short-term invoice the week earlier than after a weeks-long standoff.
“The increase in the debt limit signed into law last week provides a high degree of confidence that Treasury will continue to be able to finance the operations of the federal government through December 3, 2021,” Yellen mentioned in the letter. “However, it is imperative that Congress act to increase or suspend the debt limit in a way that provides longer-term certainty that the government will satisfy all its obligations.”
Whereas the nation has a brief reprieve from the menace of default, Yellen mentioned some investments in funds via December 3 will stay suspended. These funds will likely be made complete when the restrict is elevated or suspended, so it will not have an effect on federal retirees or staff. The Treasury additionally prolonged the suspension of some securities gross sales.
“I respectfully urge Congress to act to protect the full faith and credit of the United States,” Yellen mentioned in her letter.
If the debt ceiling is not addressed and the U.S. goes into default, it might result in thousands and thousands of People not receiving cash on time, together with seniors and disabled individuals not receiving Social Safety funds and troops not getting paid. Economists and enterprise leaders have additionally warned that markets would take a success and rates of interest throughout the board would go up. They’ve referred to as the default “catastrophic” with world financial penalties.
Although Republicans allowed Democrats in the Senate to boost the debt ceiling for the quick time period earlier this month with a easy majority vote, they’ve mentioned they won’t do it once more. They’re pushing Democrats to incorporate a provision to boost the debt ceiling of their reconciliation course of, which might be accomplished in the Senate with out assembly a 60-vote threshold. Senate Minority Chief Mitch McConnell mentioned the short-term raise of the debt restrict will present the time to take action, after having first made the suggestion again in July.
However Democrats have mentioned they need the debt ceiling addressed via common order in a bipartisan means, as has been accomplished beneath the Trump administration thrice. As the clock ticks right down to December 3, lawmakers can even must go a price range to keep away from the authorities shutting down after in addition they handed only a short-term price range final month.
