(PresidentialInsider.com)- On Wednesday, Janet Yellen sent a warning to leaders in Congress: The United States will default on its national debt as soon as next month if the debt limit isn’t raised.
The Treasury Secretary sent a letter on Wednesday saying her department would likely run out of all cash and exhaust “extraordinary” measures to ensure the federal government stays in its legal limit for borrowing.
The letter was sent to Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, House Speaker Nancy Pelosi and House Minority Leader Kevin McCarthy.
In the letter, Yellen wrote:
“Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligations for the first time in our history.
“Given this uncertainty, the Treasury Department is not able to provide a specific estimate of how long the extraordinary measures will last. However, based on our best and most recent information, the most likely outcome is that cash and extraordinary measures will be exhausted during the month of October.”
The Treasury has already taken what it calls “extraordinary measures” to help prevent America from defaulting on its national debt, since the debt limit was re-imposed back on August 11. If the Treasury were to run out of ways to prevent the country from defaulting on its obligations, it could completely cripple the financial system.
Yellen has been trying to get lawmakers to raise the debt limit for months now — even before it was re-imposed back in August. She has been warning that delays in doing so could “cause irreparable damage to the U.S. economy and global financial markets.”
Basically, Yellen is seeking to raise the debt limit so the Treasury Department can pay obligations that were approved under previous congressional majorities and presidents.
Yellen explained in her letter:
“Waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.”
“At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk.”
Despite these dire warnings, Republicans and Democrats haven’t been able to come to an agreement over who would have the responsibility for protecting the U.S. credit.
Democratic leaders in Congress and the White House are trying to tie an increase in the debt limit to a government funding bill. By doing this, they are basically daring Republican leaders to trigger defaulting on the loans while at the same time shutting down the federal government.
It’s a dangerous game Democrats are playing, rather than simply negotiating.
As an official with the White House said this week:
“We fully expect Congress to act promptly to suspend the debt limit and protect the full faith and credit of the United States and we expect them to do that in a bipartisan way just as they did three times during the prior administration.”