ALBAWABA — Treasury Secretary Janet Yellen informed Congress on Friday that the United States is projected to reach its debt limit as early as Thursday.
Yellen will then need to turn to “extraordinary measures” to avoid having the U.S. default on its debt, such as divesting payments to provide some leeway for the government to make essential payments.
Any such measures and cash on hand would only help for a limited time, likely no longer than six months, warned Yellen.
“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Yellen said, stressing that it is “critical that Congress act in a timely manner” to raise or suspend the debt limit, currently set at $31.4 trillion.
The debt limit refers to the amount of money the U.S. government is allowed to borrow to meet existing legal obligations.
"Increasing or suspending the debt limit does not authorize new spending commitments or cost taxpayers money. It simply allows the government to finance existing legal obligations that Congresses and Presidents of both parties have made in the past,". Yellen noted.
It is not the time to panic as the situation was many months away from seeing the U.S. not being able to meet all of its obligations, Shai Akabas, director of economic policy at the Bipartisan Policy Center, told CNN.
“But it is certainly a time for policymakers to begin negotiations in earnest,” Akabas said.
House Speaker Kevin McCarthy told reporters on Thursday that "we've got to change the way we are spending money wastefully in this country".
"I had a very good conversation with the president when he called me, and I told him I'd like to sit down with him early and work through these challenges," McCarthy said.
Meanwhile White House press secretary Karine Jean-Pierre on Friday said Biden is not interested in negotiating.
“It's not and should not be a political football. This is not political gamesmanship. This should be done without conditions,” Jean-Pierre said at a press briefing.
Congressman Brendan Boyle, top Democrat on the House Budget Committee, called the situation “enormously concerning", while urging Republicans “to do the right thing and come to the table to raise the borrowing limit before it's too late”.
Senate Majority Leader Chuck Schumer told CNN he thinks Republicans will ultimately “come to reality” and raise the limit.
“If you’re worried about inflation, default would be huge,” Schumer said.
Past forecasts suggest the U.S. defaulting on its debt could instantly plunge the country into a deep recession.
