Treasury Secretary Janet Yellen on On Friday he warned Congress that his department will do so need embark on “extraordinary measures” on August 2 to prevent the US government from default if the legislators are not in able to reach an agreement to increase or extend the debt ceiling.
In a letter to House Speaker Nancy Pelosi, D-Calif., Yellen put the lawmakers on note that the Treasury Department in the end of July suspends the sale of bonds, the via with which the United States finances its own debt obligations.
After August 2 and except a debt limit agreement, the Treasury will start take “extraordinary measures” to pay for Legal Congress and financial obligations, a temporary fix That allows the secretary to tap additional government accounts for a period of weeks.
“The period of time that extraordinary measures can last is subject to considerable uncertainty due to a variety of factors, including the challenges of forecast of payments and receipts of the United States government months in future, exacerbated by heightened uncertainty in payments and collections related to the economic impact of the pandemic, “Yellen told Pelosi in a letter.
The message between the Treasury secretary and the speaker of the House is a required formalities should the exceptional debt of the United States close to the legal limit. While the extraordinary measures have been deployed in the past to prevent a default, it is not clear how long Yellen’s emergency capital will be last in the face of unprecedented stimulus efforts triggered by the Covid-19 crisis.
While the United States never went in default on his debt, recent history shows that approaching uncomfortably can create chaos. In 2011, the Republicans’ rejection of the House of pass a debt the increase in the roof led to a downgrade of the US sovereign credit rating that shocked financial markets.
Economists say default, while extremely unlikely, would be catastrophic would event and would pose a significant threat to several sectors of the American economy.
Asked about Yellen’s letter, the White House press secretary Jen Psaki stressed that communication should get caught in context and noted that similar letters were sent in previous administrations.
The letter is “standard practice for Treasury Secretaries when a debt limit will be reintroduced, “Psaki said Friday afternoon.” During the previous two administrations, the Treasury secretary sent nearly 50 letters to the hill on the debt limit, some of which were very similar, in wording and requests and updates, to this letter. “
Despite the administration’s calm, it is virtually certain that Congress will violate the August 2 deadline with Democrats and Republicans blocked on several key pieces of legislation. Perhaps most notable is that Senate Majority Leader Chuck Schumer, DN.Y., remains far from compromise over a trillion-dollar agreement on physical infrastructure.
House Democrats insist that won’T pass a bill to improve the nation’s roads, bridges, broadband and waterways without a separate piece of legislation modeled on President Joe Biden’s American Families Plan for support paid leave, job education and more programs.
For his part, Senate Minority Leader Mitch McConnell, R-Ky., Told Punchbowl News earlier this month that he “can’t imagine a single Republican vote” to lift the debt limit between the “free” of democraticifor-Tutti for taxes and expenses “.
– CNBC’s Kevin Breuninger contributed to the report.
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