The United States could default on its debt sometime in October if Congress does not take action to raise or suspend the debt limit, Treasury Secretary Janet Yellen told Congress this week.
In a letter to congressional leaders, Yellen said the “extraordinary measures” that Treasury has been employing to finance the government on a temporary basis since Aug. 1 will be exhausted next month. If Congress continues to put off addressing the debt limit in the weeks ahead, it would likely hurt consumer confidence, raise short-term borrowing costs for taxpayers and negatively impact the credit rating of the U.S.
“A delay that calls into question the federal government’s ability to meet all its obligations would likely cause irreparable damage to the U.S. economy and global financial markets,” Yellen said. “At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk.”
House Speaker Nancy Pelosi (D-CA) reiterated yesterday that Democrats will not use the reconciliation process to increase the debt limit, which would bypass the need for Republican support in the Senate.
“We won’t be putting it in reconciliation,” Pelosi told reporters. “We have several options. We’ll make them known to you as we go forward. But it has to happen.”
Senate Minority Leader Mitch McConnell (R-KY) has maintained that Democrats should address the debt limit through reconciliation, the vehicle Democrats have chosen to try to advance their social spending package.
“Democrats want Republicans to help them raise the debt limit so they can keep spending historic sums of money with zero Republican input and zero Republican votes,” McConnell said last month.
The options Democrats are considering include attaching a debt ceiling increase to a stopgap spending bill to keep the government funded past Sept. 30, or potentially attaching it to the bipartisan infrastructure bill that has passed the Senate and is scheduled to get a House vote by Sept. 27.