Treasury Secretary Janet Yellen told lawmakers Wednesday that they must raise or suspend the limit on total U.S. debt before August 1, or risk incurring “absolutely catastrophic economic consequences.”
A two-year agreement that has suspended the debt ceiling expires after July 31, at which point the Treasury would take what it calls extraordinary measures to keep paying the government’s bills. In the past, the Treasury’s extraordinary measures have provided a cushion of several months, but massive spending on Covid relief programs has muddied the financial picture. Speaking to a Senate subcommittee, Yellen said the government could run out of money at some point in August, possibly when Congress is out of town on its summer recess.
“I believe it would precipitate a financial crisis, it would threaten the jobs and savings of Americans, and at a time when we're still recovering from the COVID pandemic,” Yellen said of a default.
“I would plead with Congress simply to protect the full faith and credit of the United States by acting to raise or suspend the debt limit as soon as possible.”