Treasury Secretary Janet Yellen told congressional leaders Friday that the U.S. will reach its borrowing limit on Aug. 1, and Treasury officials will take “extraordinary measures” after that if Congress doesn’t raise the ceiling and avoid a default on government debts.
“If Congress has not acted to suspend or increase the debt limit by Monday, August 2, 2021, [the Treasury Department] will need to start taking certain additional extraordinary measures in order to prevent the United States from defaulting on its obligations,” Ms. Yellen wrote in a letter.
Senate Minority Leader Mitch McConnell, Kentucky Republican, said this week he thought that no congressional Republicans will support an increase in the so-called debt ceiling when the current limit is surpassed. He cited concerns that the Biden administration’s high spending plans are causing a spike in inflation that’s hurting families.
“I can’t imagine a single Republicans in this environment that we’re in now — this free-for-all for taxes and spending — to vote to raise the debt limit,” Mr. McConnell told reporters Wednesday.
But Ms. Yellen warned that uncertainty about the federal government meeting its obligations can be extremely harmful to the economy.
“Even the threat of failing to meet those obligations has caused detrimental impacts in the past, including the sole credit rating downgrade in the history of the nation in 2011,” she said.
The Treasury Department will stop selling state and local government securities on July 30 until the debt limit is suspended or raised, Ms. Yellen said. She said her department is not able to give a specific date on which the government would run out of money.
There are “several scenarios” in which the government could run out of cash “soon after Congress returns from recess” in early September, she said.