WASHINGTON — Treasury Secretary Janet Yellen told Congress on Friday that she will start taking emergency measures next week to keep the government from an unprecedented default on the national debt, warning that a default would cause “irreparable harm to the U.S. economy and the livelihoods of all Americans.”
In a letter to House and Senate leaders, Yellen said her actions will buy time until Congress can pass legislation to either raise the debt limit or suspend it again for a period of time.
The debt limit has been suspended for the past two years but will go back into effect on July 31. The total debt subject to the limit currently stands at $28.4 trillion.
Yellen said her first move on July 30 will be to suspend the sale of state and local government securities, which are used by some local jurisdictions to meet some of their financing needs but increase the level of debt held by the federal government.
If Congress has not acted to either raise the debt limit or suspend it by Aug. 2, Yellen said she will be taking “certain additional extraordinary measures in order to prevent the United States from defaulting on its obligations.”
In her letter, Yellen noted that even the threat of a debt default — something the United States has never done — triggered the country’s first-ever credit downgrade. That came during a standoff between Republicans in Congress and the Obama administration in 2011, when the Standard & Poor’s credit rating agency downgraded its rating on a portion of U.S. debt.
“That is why no president or Treasury secretary of either party has ever countenanced even the suggestion of a default on any obligation of the United States,” Yellen wrote.
However, Senate Minority Leader Mitch McConnell, R-Ky., threatened this week that all Republican senators would vote against extending government borrowing authority. He cited objections to President Joe Biden’s plans for boosting domestic spending and raising taxes on the rich.
If that occurred, Senate Democrats would lack the 10 GOP supporters they’d need to overcome a Republican filibuster, or delaying tactics, and move such language through the 50-50 Senate with 60 votes.