Finance Minister Janet Yellen said the department was now taking “extraordinary measures” to keep funding to the government. In her letter to Pelosi, Yellen warned that if the debt limit is not raised, “the United States will not be able to meet its obligations for the first time in history.”
US government debt skyrocketed during the pandemic as Washington passed three major spending bills to ease the negative impact on the economy.
The US Congress has never stopped approving the debt ceiling increase or suspending it. Otherwise, the US government faces a funding shortage. However, the budget war between the Obama administration and the Republican Party lasted for quite a long time in 2011, causing the rating agency Standard & Poor’s (S&P) to downgrade for the first time in US history. US credit rating from AAA to AA+. This forced former President Barack Obama to speak reassuringly that “America is still an AAA country”.
US Navy Secretary Janet Yellen. Photo: Picture Alliance
In her letter, Ms Yellen wrote: “Based on our most accurate and most recent information, the most probable outcome is that cash and the ‘extraordinary measures’ being used will be exhausted. exhausted in October”. The department was unable to provide an exact date on when the upper limit would be reached.
The debt limit was suspended for two years from July 2019 when public debt was capped at $22 trillion. That two-year suspension expires at the end of July, resetting the cap at $28 trillion.
“It has to be passed,” Pelosi said at a news conference. Under former President Trump, Pelosi noted that Democrats support raising the debt limit, because it is a “responsible thing to do” and hope Republicans will accompany the effort.
In the past, Republicans have used the debt limit debate to gain concessions from Democrats. This time, Republicans said they would oppose Democrats’ attempt to tackle the debt limit by attaching a provision to the emergency budget bill that Congress must pass, before the start of the year. New government finances on October 1.
Some Republicans have said they want Democrats to include a provision in the more than $1 trillion infrastructure plan, a move Democrats have rejected.