While the deadline for Congress to raise the U.S. debt ceiling fast approaches on Aug. 2, Treasury Secretary Janet Yellen warned lawmakers that her department will need to use “extraordinary measures” to pay debts if they don’t raise it.
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Yellen issued the warning in a standard letter to House Speaker Nancy Pelosi (D-Calif.), according to CNBC. White House Press Secretary Jen Psaki told reporters that such letters are always sent when the U.S. is close to making a debt limit decision.
Partisan clashing in Congress is expected to stall the decision, said CNBC.
While Senate Majority Leader Chuck Schumer (D-N.Y.) is aiming to push through a $1 trillion physical infrastructure deal that will add to recent federal spending increases spurred by the COVID-19 pandemic, Senate Minority Leader Mitch McConnell (R-K.Y.) has said the GOP will not be in support of raising the ceiling.
If lawmakers do not increase the debt limit, Yellen will be forced to suspend debt issuance (halt the purchase of bonds used to pay debts) and use “extraordinary measures” to pay the country’s bills, according to the Congressional Budget Office. Extraordinary measures could include suspending certain investments and other actions related to securities (tradeable financial assets). A cash balance would also help the Treasury if the debt limit is not suspended or raised.