secretary of the treasury Janet YellenJanet Louise Yellen Biden raises human rights with Chinese Xi in four-hour meeting Biden and Xi hold ‘frank’ discussion amid high tensions Treasury sends fifth monthly installments as part of expansion the child tax credit PLUS Told congressional leaders on Tuesday that the federal government could default on its debt soon after Dec. 15 without taking action to increase the federal borrowing limit.
In a Tuesday letter, Yellen said she had “a high degree of confidence” in the Treasury’s ability to keep the United States up to date on debt payments until the middle of next month – roughly two weeks. more than its initial screening of December 3.
She warned, however, that the United States could run out of money shortly after transferring $ 118 billion to the Highway Trust Fund to comply with the recently signed bipartisan infrastructure bill.
The infrastructure bill signed by Biden on Monday orders Yellen to transfer road funds one month after the measure is enacted, which is December 15. Yellen said the Treasury could exhaust its ability to maintain the solvency of the United States in the days following the transfer of these funds.
“There are scenarios in which the Treasury would find itself with insufficient remaining resources to continue funding US government operations beyond that date,” Yellen wrote.
“As the federal government’s cash flows are subject to inevitable variability, I will continue to update Congress as more information becomes available,” she added.
While Yellen has urged lawmakers to raise or suspend the debt ceiling as soon as possible, the announcement of a later “X date” could give Congress more time to chart a course to avert potential disaster.
Biden signed a bill in October to raise the federal debt limit by $ 480 billion days before the United States was on track to default on October 18. The measure, passed with only Democratic votes after GOP senators reluctantly broke an obstruction, aimed to keep the United States from defaulting on its debt until December 3 – the date on which government funding federal expires.
While dozens of brief government shutdowns have had little impact on the economy as a whole, the United States has never defaulted on its debt and could derail the global economy if it misses a payment. Foreign governments, financial institutions, and investors hold trillions of dollars in U.S. debt issued through Treasury bonds that could be irrecoverable if the U.S. cannot pay its bills.
The resulting financial shock could take hold of global financial markets and possibly trigger a national recession.
Despite this, Republicans have pledged to block any Democratic attempt to raise the federal debt limit despite having done so three times under the former President TrumpDonald TrumpHouse Freedom Caucus Elects Rep. Scott Perry As New President Meadows ‘Between A Rock And A Hard Space’ With Trump, Jan. 6 Panel On The Money – Biden Closes Infrastructure Week MORE with bipartisan support. While GOP lawmakers have linked their refusal to Democratic spending plans, raising the debt ceiling is critical to paying off decades of previous spending and has no direct impact on future spending levels.
Democrats could raise the debt ceiling by a specific amount through a budget reconciliation resolution, which only requires simple majorities to pass through each chamber. Budget experts say the process could take two weeks, but could involve countless amendment votes that could open Democrats to future political and legislative headaches.
Democratic leaders have resisted raising the debt ceiling through reconciliation even as the impending default loomed in October, saying it would set an irresponsible precedent. Even so, they might be forced to maintain the country’s creditworthiness through reconciliation if the Senate Minority Leader Mitch mcconnellAddison (Mitch) Mitchell McConnell Leahy’s retirement upsets Vermont policy Trump rejects report McConnell tried to unsinvite him from Biden inauguration McConnell tried to unsinvite Trump from Biden inauguration, book says MORE (R-Ky.) Refuses to go back on his promise to block an increase in the debt ceiling.
Update at 6.15 p.m.