- Treasury Sec. Janet Yellen said Congress has until October 18 to raise the debt limit.
- She previously said the government’s ability to pay its bills will run out sometime in October.
- The GOP struck down a bill that would have raised the limit on Monday, refusing to help Democrats.
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Democrats started off this week thinking they had until Thursday to raise the debt ceiling without any Republicans. But Treasury Secretary Janet Yellen just clarified the deadline to raise the limit, giving lawmakers a bit more time before the country defaults on its debt.
Early in September, Yellen warned Congress in a letter that they had until October to raise the debt limit, saying that the Treasury’s “extraordinary measures” to keep the government funded would likely run out earlier than planned due to financial uncertainty caused by the pandemic. On Tuesday, Yellen wrote a new letter with a specific deadline for Congress to work with: October 18.
“At that point, we expect Treasury would be left with very limited resources that would be depleted quickly,” Yellen wrote. “It is uncertain whether we could continue to meet all the nation’s commitments after that date.”
Yellen noted that while that date is her “best estimate,” the government’s cash flows could change and move forward or push back the October 18 deadline. Given that uncertainty, she said, Congress should act as soon as possible to raise or suspend the debt limit and prevent a default.
“The full faith and credit of the United States should not be put at risk,” she wrote.
On Monday night, Senate Republicans struck down a bill that passed through the House that would have raised the debt ceiling and prevented a government shutdown. Since June, Senate Minority Leader Mitch McConnell has been adamant that Democrats must raise the debt ceiling on their own, largely because his party does not want to fund Democrats’ $US3.5 ($AU5) trillion social-spending package.
But Democrats have been quick to point out the GOP’s hypocrisy, noting that raising the debt limit would also cover previous spending obligations – particularly the $US8 ($AU11) trillion in debt incurred under President Donald Trump from his 2017 tax cuts and other bipartisan pandemic spending packages.
Democrats have not yet announced an alternative route they plan to take to raise the debt limit, but given the slight extension of the deadline to do so, including it in their reconciliation bill might become an option – an idea Democrats have previously opposed, saying there’s not enough time to raise the limit through that method.
As Biden’s administration has made clear, though, the consequences of failing to act promptly are dire. Yellen said last week that allowing a default would lead to “economic catastrophe,” delaying Social Security payments and increasing unemployment, and White House expressed the same concerns, warning in a memo to state and local governments that a government default could lead to potential big cuts in measures like Medicaid and free school lunches.