US Treasury Secretary Yellen warns Congress on debt limit

US Treasury Secretary Janet Yellen urged lawmakers on Friday to increase or suspend the nation's debt limit as soon as possible and warned that if Congress does not act by August 2 the Treasury Department would need to take "extraordinary measures" to prevent a US default.

In a letter to House of Representatives Speaker Nancy Pelosi, Yellen said that October 1, the first day of the next fiscal year, could be a critical date for the US ability to pay its obligations without debt limit legislation due to large federal outlays scheduled for then.

In the letter, also sent to other congressional leaders from both parties, Yellen said US debt would be at the statutory limit on August 1, when a two-year suspension is set to expire.

A partisan fight over raising the debt ceiling erupted in Congress this week. Republicans have seized upon the debt limit issue to attack Democrats for pushing legislation that they say has led to inflation and escalating public debt.

"Today, Treasury is announcing that it will suspend the sale of State and Local Government Series (SLGS) securities on July 30, 2021," Yellen wrote.

The suspension of such sales to state and local municipal bond issuers will continue until the debt ceiling is suspended or raised, Yellen said.

"If Congress has not acted to suspend or increase the debt limit by Monday, August 2, 2021, Treasury will need to start taking certain additional extraordinary measures in order to prevent the United States from defaulting on its obligations," Yellen added.

A failure to work out differences among lawmakers over whether government spending cuts should accompany an increase in the statutory debt limit, currently set at $28.5 trillion, could lead to a federal government shutdown - as has happened three times in the past decade - or even a debt default.

Published in The Express Tribune, July 25^th, 2021.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.