U.S. Treasury Secretary Janet Yellen testifies earlier than the Senate Appropriations Subcommittee on Financial Services about the FY22 Treasury finances request on Capitol Hill in Washington, DC, June 23, 2021.
Greg Nash | Pool | Reuters
Treasury Secretary Janet Yellen on Tuesday instructed House Speaker Nancy Pelosi that Congress has slightly below three weeks to deal with the looming debt ceiling and keep away from near-certain financial calamity.
“We now estimate that Treasury is likely to exhaust its extraordinary measures if Congress has not acted to raise or suspend the debt limit by October 18,” she wrote in a letter. “At that point, we expect Treasury would be left with very limited resources that would be depleted quickly.”
Yellen, who will testify earlier than the Senate later Tuesday morning, warned in a separate statement to lawmakers that failure to droop or raise the debt limit would result in the first-ever U.S. default and have extreme penalties for the U.S. financial system.
“It is imperative that Congress swiftly addresses the debt limit. If it does not, America would default for the first time in history,” she mentioned in her remarks to the Senate Banking Committee. “The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession.”
Yellen’s letter to Pelosi, D-Calif., is the newest in a string of communications between the Treasury secretary and congressional management as the U.S. nears lacking a fee to its debtholders. A spokesman for the House speaker didn’t instantly reply to a request for remark.
Because the U.S. has by no means defaulted on its debt earlier than, economists should depend on forecasts and guesswork when making an attempt to estimate the financial fallout a default would deliver.
Pelosi and Senate Major Leader Chuck Schumer, D-N.Y. have in latest weeks referred to as upon Republicans to cross a suspension to the debt ceiling as a bipartisan obligation.
Senate Republicans on Monday blocked a invoice that may fund the authorities and droop the U.S. borrowing limit. The GOP opposed the House-approved invoice as a result of it included a provision to droop the debt ceiling, a job Republicans say should be as much as Democrats alone.
Republicans need Democrats to raise or droop the debt ceiling by together with a provision of their $3.5 trillion reconciliation invoice.
Government funding and the debt ceiling are separate points.
The U.S. authorities will shut down at the finish of September if lawmakers fail to approve a brand new funding or appropriations invoice. In that case, authorities businesses must ship 1000’s of federal staff residence and function at a restricted capability till funding is resumed.
The debt ceiling is seen as the better financial menace since failing to droop or raise the U.S. borrowing limit would end in a first-ever default and untold financial havoc.
The Treasury Department estimates that lawmakers possible have till someday in October earlier than it’s not capable of pay for receipts on funding Congress has already authorised.
Raising or suspending the debt ceiling doesn’t authorize new federal spending, however moderately permits Treasury to honor money owed already incurred throughout the Trump and Biden administrations. Even if the Biden administration had handed no new spending initiatives in 2021, lawmakers would nonetheless should raise or droop the ceiling.