Tulsa World

Yellen warns U.S. may hit debt limit in October

- MARTIN CRUTSINGER AND ALAN FRAM

WASHINGTON — Treasury Secretary Janet Yellen is warning Congress that she will run out of maneuverin­g room to prevent the U.S. from broaching the government’s borrowing limit in October.

In a letter to congressio­nal leaders Wednesday, Yellen said that she still could not provide a specific date for when she will be unable to keep the government funded, absent action by Congress to raise the debt limit.

“Based on our best and most recent informatio­n, the most likely outcome is that cash and extraordin­ary measures will be exhausted during the month of October,” Yellen wrote.

Yellen said recent measures to address the debt limit had enjoyed “broad bipartisan support,” But Republican­s have said they will oppose an effort by Democrats to deal with the debt limit by attaching a provision to an emergency budget bill that Congress will need to pass before the start of the budget year on Oct. 1. That legislatio­n is needed to avoid a government shutdown.

Instead, some Republican­s have said Democrats should attach a debt limit increase to the $3.5 trillion infrastruc­ture plan that Democrats are hoping to pass without Republican votes, using a process known as “budget reconcilia­tion.”

But House Speaker Nancy Pelosi said Wednesday that Democrats will not be putting the debt limit increase in the reconcilia­tion measure. She said Democrats have several “options” for raising the debt ceiling but she did not specify what they were.

She said Democrats supported lifting the borrowing limit under Trump “because it’s the responsibl­e thing to do. I would hope that the Republican­s would act in a similarly responsibl­e way.”

The debt limit is the amount of money Congress allows Treasury to borrow to keep the government running. When the debt limit was suspended for two years in July 2019, the public debt subject to the limit stood at $22 trillion.

When the debt limit was re-instated, the limit reset to $28.4 trillion, the existing level of debt. The big jump in the past two years reflected the massive amounts of support Congress voted to approved to help individual­s and businesses get through a global pandemic.

Yellen has been using what is termed in law “extraordin­ary measures” which cover a variety of bookkeepin­g maneuvers Yellen can take to remove debt from various government trust funds including federal workers’ pensions. Once the debt limit impasse is resolved, the funds removed from the trust funds are restored with interest.

Yellen urged Congress to act without delay.

“Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligation­s for the first time in our history,” Yellen said.

While Republican­s in Congress have often used the debt limit debate to extract budget concession­s from Democratic presidents, lawmakers have never failed to raise the debt limit or suspend it to allow the government to keep borrowing.

However, in 2011, a budget battle between the Obama administra­tion and Republican­s dragged on for so long that the credit rating agency Standard & Poor’s downgraded a portion of Treasury debt from its AAA rating for the first time in history.

“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise shortterm borrowing costs for taxpayers and negatively impact the credit rating of the United States,” Yellen said.

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