U.S. Treasury Secretary Yellen warns Congress: the U.S. government will hit the debt ceiling next Thursday
News from the Financial Associated Press on January 14 (edited by Niu Zhanlin)U.S. Treasury Secretary Yellen notified Congress on Friday local time that U.S. government spending will hit the current debt ceiling on January 19 (next Thursday), so she called on Congress to pass a temporary bill as soon as possible to raise the government debt ceiling again to avoid Government shutdown and possible debt default.
Yellen wrote in a letter to House Speaker McCarthy that once the debt ceiling is reached, the Treasury Department will need to begin taking certain extraordinary measures to prevent the United States from defaulting on its debt.
(Source: U.S. Treasury Department) Yellen said that while it is impossible to estimate how long the special measures will last, it is unlikely that the cash and special measures provided to avoid hitting the debt limit will be exhausted before early June.
Behind the letter is a political battle over fiscal policy between Democrats and Republicans in the United States, a potentially protracted fight that could shake financial markets, unnerve consumers and threaten the economy with disastrous consequences. of normal operation. Economists expect the Treasury to run out of cash around August if the debt ceiling is not raised.
House Republican leaders said they would insist on spending cuts in exchange for agreeing to raise the debt ceiling. But Democrats and President Joe Biden, who control the Senate, reject such “hijacking” and want to increase the budget directly.
The current statutory debt ceiling, the total amount of debt the Treasury Department can issue to the public and other government agencies, is just under $31.4 trillion. It was set in December 2021, when Congress raised it by $2.5 trillion. Currently, the U.S. government is about $78 billion away from reaching the cap.
Yellen called on lawmakers to break the impasse as soon as possible to prevent threats to the U.S. economy and financial markets. Yellen pointed out that timely action by Congress to raise the debt ceiling is crucial, and failure to meet the government’s obligations will cause irreparable damage to the U.S. economy, the livelihoods of all Americans, and global financial stability.
Wall Street analysts don’t think the risk of a debt default will really materialize until the second half of 2023, when the Treasury’s extraordinary measures to avoid exceeding the cap will be exhausted.
Some economists and bond strategists warn that if a compromise cannot be reached, then the deadlock of 2011 could be repeated. The debt ceiling crisis in 2011 caused Standard & Poor’s to downgrade the US sovereign credit rating, and the financial market fell into a risk-off mode, causing huge chaos on Wall Street and undermining the economic recovery after the financial crisis.
Former U.S. Treasury Secretary Lawrence Summers said the fight over the debt ceiling was Washington’s “silliest move,” given the importance of meeting U.S. obligations. “A default would be a catastrophe that would mean a permanent increase in borrowing costs,” he said earlier on Friday.
