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WASHINGTON, July 23 (Reuters) – US Treasury Secretary Janet Yellen on Friday urged lawmakers to raise or suspend the country’s debt limit as soon as possible and warned that if Congress did not act by on August 2, the Treasury Department is expected to take “extraordinary” action. measures â€to prevent a US default.
In a letter to House of Representatives Speaker Nancy Pelosi, Yellen said October 1, the first day of the next fiscal year, could be a critical date for the United States’ ability to pay its obligations without legislation on debt limitation due to significant federal planned spending. for then.
In the letter, also sent to other congressional leaders from both parties, Yellen said US debt would be at the legal limit on August 1, when a two-year suspension is expected to expire.
A partisan struggle to raise the debt ceiling erupted in Congress this week. Republicans have taken up the debt limit issue to attack Democrats for pushing legislation they say has led to inflation and escalating public debt.
“Today, the Treasury announces that it will suspend the sale of State and Local Government Series (SLGS) securities at 12:00 p.m. on July 30, 2021,†Yellen wrote.
The suspension of those sales to state and local municipal bond issuers will continue until the debt ceiling is suspended or raised, Yellen said.
“If Congress has not acted to suspend or increase the debt limit by Monday, August 2, 2021, the Treasury will need to start taking some additional extraordinary measures to prevent the United States from defaulting on its obligations “, added Yellen.
Failure to resolve differences among lawmakers over whether cuts in public spending should accompany an increase in the legal debt limit, currently set at $ 28.5 trillion, could lead to a federal government shutdown – as has happened three times in the last decade – or even a debt default.
White House press secretary Jen Psaki told reporters that President Joe Biden’s administration is not setting a new deadline for congressional action, but Yellen offered an idea of ​​the timing of necessary actions.
“We certainly expect Congress to act in a bipartisan fashion, as it did three times under the previous administration, to raise the debt ceiling,” Psaki said.
Yellen’s letter said it was not clear how long the Treasury measures would last, citing increased uncertainty about the payment and revenue forecast due to the COVID-19 pandemic. Yellen said there are scenarios in which Treasury liquidity and extraordinary measures to continue borrowing could be exhausted shortly after Congress fully returns from its summer recess in mid-September.
“For example, on October 1 alone, liquidity and extraordinary measures are expected to decline by around $ 150 billion due to large mandatory payments, including an investment in retirement and health linked to the Department of Defense,” he said. Yellen said.
Yellen told Reuters in an interview last week that the Treasury was on track to end July with a cash balance of $ 450 billion, up from $ 1.12 trillion at the end of March.
Wednesday, the Treasury reported a cash balance of $ 616.3 billion and a total debt of $ 28.44 billion subject to the federal debt ceiling.
Reporting by Doina Chiacu and Susan Heavey; Additional reports by David Lawder and Andrea Shalal; Editing by Franklin Paul and Will Dunham
Our standards: Thomson Reuters Trust Principles.
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