The Secretary of the US Treasury, Janet Yellen, asks Congress to act to impose a limit on public debt; otherwise, the United States could face a deficit. Yellen told senators that raising the debt limit would have absolutely catastrophic economic consequences for the United States.
According to Reuters, Yellen told the Senate appropriations subcommittee that defaulting on the national debt should be considered unthinkable. Therefore, the official stated that increasing the debt limit would have absolutely catastrophic economic consequences. Yellen added that to avoid uncertainty in financial markets, Congress must pass a new debt-cap bill, allowing the Treasury Department to continue borrowing before the latest suspension expires on July 31.
In the past, the Treasury avoided a potential default for several months by employing extraordinary measures such as suspending contributions to government employee pension funds, but spending on pandemic relief programs has added uncertainty to government cash flows. These measures could be exhausted in August when Congress takes its traditional summer recess, Yellen said. For this reason, the official urged legislators to take action on the matter as soon as possible since this issue, due to its importance, cannot be postponed, especially owing to the negative effects that she had mentioned.
Janet Yellen is not the only one who has been concerned about the issue, so are the members of the Republican parliamentary group, who have publicly said that they will stop the Democrats in case they try to increase the public debt of the country. Since last week the opponents have been expressing their position. Based on current law, during the Trump administration, Congress agreed to allow the government to acquire debt until July 31 of this year. At that point, the Treasury Department can take what is known as extraordinary measures to keep the government solvent.
To raise the debt, the Senate plays a key role, but the debt ceiling is subject to bipartisan negotiation, which means that the Democrats will need the support of the Republican Party. For this type of issue, the ruling party will not be able to approve it by itself appealing to its majority or using mechanisms such as budget reconciliation.
After the Secretary of the Treasury, Janet Yellen visited the Senate, the position of the Republicans is probably tougher because of the scenario she outlined. So far, no Democrat has spoken out publicly to expand the country’s debt ceiling, but if the ruling party wants to raise the debt threshold, it will require 10 Republican votes.