Yellen Outlines Measures on Debt Limit 07/24 06:32
Treasury Secretary Janet Yellen told Congress on Friday that she will start
taking emergency measures next week to keep the government from an
unprecedented default on the national debt, warning that a default would cause
"irreparable harm to the U.S. economy and the livelihoods of all Americans."
WASHINGTON (AP) -- Treasury Secretary Janet Yellen told Congress on Friday
that she will start taking emergency measures next week to keep the government
from an unprecedented default on the national debt, warning that a default
would cause "irreparable harm to the U.S. economy and the livelihoods of all
In a letter to House and Senate leaders, Yellen said her actions will buy
time until Congress can pass legislation to either raise the debt limit or
suspend it again for a period of time.
The debt limit has been suspended for the past two years but will go back
into effect on July 31. The total debt subject to the limit currently stands at
Yellen said her first move on July 30 will be to suspend the sale of state
and local government securities, which are used by some local jurisdictions to
meet some of their financing needs but increase the level of debt held by the
If Congress has not acted to either raise the debt limit or suspend it by
Aug. 2, Yellen said she will be taking "certain additional extraordinary
measures in order to prevent the United States from defaulting on its
In her letter, Yellen noted that even the threat of a debt default --
something the United States has never done -- triggered the country's
first-ever credit downgrade. That came during a standoff between Republicans in
Congress and the Obama administration in 2011, when the Standard & Poor's
credit rating agency downgraded its rating on a portion of U.S. debt.
"That is why no president or Treasury secretary of either party has ever
countenanced even the suggestion of a default on any obligation of the United
States," Yellen wrote.
However, Senate Minority Leader Mitch McConnell, R-Ky., threatened this week
that all Republican senators would vote against extending government borrowing
authority. He cited objections to President Joe Biden's plans for boosting
domestic spending and raising taxes on the rich.
If that occurred, Senate Democrats would lack the 10 GOP supporters they'd
need to overcome a Republican filibuster, or delaying tactics, and move such
language through the 50-50 Senate with 60 votes.
Democrats haven't yet decided on a legislative strategy to deal with a
But Yellen's letter could steer them toward putting a provision extending
the debt limit into a bill Congress will have to approve before Oct. 1 to
prevent a government shutdown that day. The regular spending bills financing
federal agencies for the fiscal year that begins Oct. 1 are unlikely to have
been enacted by then.
That tactic would dare Republicans to block a bill that, if rejected, could
result in both a federal shutdown and a default. Most politicians would be
averse to being blamed for such events, especially heading into an election
Responding to McConnell's comments this week, Senate Majority Leader Chuck
Schumer, D-N.Y., called them "shameless, cynical and totally political."
Yellen's reference to the use of "extraordinary measures" to allow the
government to keep borrowing to meet its debt service obligations and make
payments on such benefits as Social Security refers to a variety of
book-keeping maneuvers past Treasury secretaries have used.
Those include disinvesting funds from accounts that pay pension benefits to
government workers. Once the debt ceiling is dealt with, the funds that have
been disinvested from various government accounts are replaced.
Yellen said the unusual circumstances surrounding the government's response
to the coronavirus pandemic made it hard to predict when she will run out of
maneuvering room. She said that under some scenarios, her ability to keep
borrowing might come to an end soon after Congress returns from its August
She said a particular challenge will come on Oct. 1, when government
resources are expected to decline by about $150 billion due to large mandatory
payments, including a required investment for Department of Defense-related
retirement and health care support.
White House Press Secretary Jen Psaki said Friday that the U.S. government
has never allowed a debt default, which she said would be a "catastrophic
"We expect Congress to act promptly to raise or suspend" the debt limit and
"protect the full faith and credit of the United States," Psaki told reporters.