Yellen warns Treasury will run out of liquidity on October 18 if debt limit is not raised
Treasury Secretary Janet Yellen issued another warning to Congress on Tuesday. If lawmakers don’t suspend or increase the debt ceiling by October 18, the Treasury would default on its loans.
“At this point, we would expect the Treasury to end up with very limited resources that would quickly run out,” Yellen wrote in a letter to House Speaker Nancy Pelosi. “It is not certain that we can continue to meet all of the nation’s commitments after this date.”
Yellen’s letter arrived a day after Republican senators blocked a bill which would raise the debt ceiling and avoid a government shutdown, in the hope of getting Democrats to raise the debt ceiling themselves.
Tuesday’s letter was Yellen’s fourth letter to Congress this year, urging lawmakers to suspend or raise the debt ceiling. The borrowing limit was suspended during the pandemic, but was reinstated on August 1.
Since then, the Treasury has used extraordinary measures to temporarily fund the government, Yellen wrote in a letter earlier this month. The measures included the suspension of investments in the Civil Service Pension and Disability Fund and the Postal Service Retiree Health Benefit Fund. At the time, Yellen estimated that the Treasury would exhaust its measures in October. She refined her screening from Tuesday to October 18.
Yellen, who will testify before the Senate on Tuesday, is expected to end his testimony by urging Congress to tackle the debt ceiling, according to his prepared remarks.
“It is imperative that Congress quickly address the debt limit,” Yellen will say. “If not, America would default for the first time in history. The full confidence and credit of the United States would be jeopardized, and our country would likely face a financial crisis and economic recession. “
Federal Reserve Chairman Jerome Powell will also testify before the Senate Committee on Banking, Housing and Urban Affairs on Tuesday. In prepared remarks released Monday, Powell told senators that while he expects the economy to continue to strengthen, inflation continues to be a real concern.
“As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to bottlenecks in certain sectors,” Powell said in prepared remarks. The Fed expects inflation to subside over the next two months, but the bank is ready to act if levels rise alarmingly, Powell said.
Write to Sabrina Escobar at [email protected]