Treasury Secretary Janet Yellen warned Congress on Friday that the U.S. will likely surpass its debt ceiling on Thursday and will resort to “extraordinary measures” to prevent default.
Yellen said in a letter to House and Senate leaders that her actions would buy time until Congress can enact legislation raising the debt ceiling or temporarily suspending it.
These strategies include deferring some payments, such as retirement plan contributions for government employees, to free up some cash for other deemed crucial expenses, such as Social Security and debt payments.
According to her, failure to fulfill the government’s responsibilities “would undermine the U.S. economy, all Americans’ livelihoods, and the stability of the global financial system irreparably.”
Indeed, in the past, even the possibility that the U.S. government would default on its obligations has resulted in actual harm, including the only reduction of our country’s credit rating in history in 2011.
While Treasury cannot predict how long the U.S. would be able to continue paying its debts, Yellen noted that “it is doubtful that cash and exceptional measures will be depleted before early June.”
The fight over lifting the debt ceiling will almost surely culminate in a political clash between newly empowered GOP members who now control the House and President Joe Biden and Democrats, who had enjoyed one-party dominance of Washington for the past two years.
According to previous predictions, a default would plunge the nation into a severe recession when the global GDP weakens.
The U.S. and most of the rest of the globe are experiencing high inflation due to the epidemic and Russia’s invasion of Ukraine.