Just shy of two weeks before Christmas – when many Americans will be burdened with the costs of gifts and holiday dinners – the federal government could be having its own financial crisis.
According to a letter Treasury Secretary Janet Yellen sent to Speaker of the House Nancy Pelosi Tuesday, the Treasury could be left with insufficient funds to finance the U.S. government by Dec. 15.
Yellen explained that when President Joe Biden signed the Infrastructure Investment and Jobs Act Monday, $118 billion was appropriated to the Highway Trust Fund. These funds must be transferred to the fund within one month, falling on Dec. 15. Once the money is in the fund, it is to be invested in “nonmarketable Treasury securities subject to the debt limit.”
“While I have a high degree of confidence that Treasury will be able to finance the U.S. government through December 15 and complete the Highway Trust Fund investment, there are scenarios in which Treasury would be left with insufficient remaining resources to continue to finance the operations of the U.S. government beyond this date,” said Yellen.
Previously, Yellen sent an Oct. 18 letter to lawmakers pleading with them to raise the debt ceiling to avoid hitting the debt ceiling – the point where the country would not be able to meet all of its obligations in full and on time – on Dec. 3. Congress did in increase the debt limit by $480 billion, but they will need to do it again in order to avoid default next month.
“To ensure the full faith and credit of the United States, it is critical that Congress raise or suspend the debt limit as soon as possible,” said Yellen in her letter this week.
As of Oct. 29, the Bipartisan Policy Center also estimated that the U.S. government would reach its debt ceiling – the point where the country would not be able to meet all of its obligations in full and on time – some time between mid-December and mid-February.
“Ultimately, failing to raise or suspend the debt limit in a timely manner would be a voluntary decision by lawmakers to stop paying some of the nation’s bills. This would be unprecedented in modern American history,” said the center. If lawmakers do make that decision, the federal government could miss or delay critical payments such as veterans’ benefits, military and federal salaries, and Medicare reimbursement.
While Democrat Senate Majority Leader Chuck Schumer said this week that he would like to suspend the debt limit “in a bipartisan way,” Republican Senate Minority Leader Mitch McConnell said his party would not vote to raise the debt limit, according to CBS News. Democrats could raise the debt limit through reconciliation, which would not require Republican support.
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