3 Aug 2021
Treasury Secretary Janet Yellen on Monday announced a series of so-called “extraordinary measures” the department is taking to give the federal government more room to spend under a reimposed debt cap.
In a letter to Congress, Ms. Yellen said that the nation’s debt will hit its statutory limit on Aug. 1 and that it is possible that soon after lawmakers return from their August recess the United States could face the dire prospect of defaulting on its obligations. Urging Congress to act, she recalled that in 2011 the threat of default caused the nation’s credit rating to be downgraded.
“Even the threat of failing to meet those obligations has caused detrimental impacts in the past, including the sole credit rating downgrade in the history of the nation in 2011,” Ms. Yellen wrote. “This 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 said the duration of "extraordinary measures" was uncertain because of the economic impact of the pandemic on tax receipts. Last month, she noted that raising the debt ceiling does not prompt more federal spending, it only permits the government to pay back what it owes.
"Failure to meet those obligations would cause irreparable harm to the U.S. economy and the livelihoods of all Americans," Yellen wrote in a letter to House Speaker Nancy Pelosi.
Congress last suspended the debt ceiling for two years under President Donald Trump in July 2019. But now, many Republicans are balking at raising the debt limit without ensuring spending cuts from Democrats, as they similarly did when they controlled Congress under President Barack Obama. Senate Minority Leader Mitch McConnell suggested last month Democrats would have to raise the debt ceiling on their own.