US Treasury running out of measures to avert June debt default: Yellen
4 Min Read
The US Treasury Secretary says her department has nearly exhausted the "extraordinary measures" it has been using for months.
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US Treasury Secretary Janet Yellen during a US House Committee on Financial Services hearing on the Annual Report of the Financial Stability Oversight Council, on Capitol Hill in Washington, DC, US, May 12, 2022 (Reuters)
US Treasury Secretary Janet Yellen warned Congress through ABC News on Sunday that failing to resolve the debt ceiling issue on their part might create a "constitutional crisis" and send out a ripple effect across the financial markets.
"It simply is unacceptable for Congress to threaten economic calamity for American households and the global financial system as the cost of raising the debt ceiling and getting the agreements on budget priorities," Yellen said in an interview on This Week.
Yellen warned on Monday that the US is threatened by a debt default as soon as the start of June, as lawmakers struggle over raising the borrowing limit.
Read more: US Republican debt ceiling plan would slow growth: Moody's
In a letter to House Speaker Kevin McCarthy, she said, "Our best estimate is that we will be unable to continue to satisfy all of the government's obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time."
Asked today if emergency routes are considered to steer away from the anticipated political and economic disaster yet to come, including US President Joe Biden using executive powers granted by the 14th amendment to bypass Congress on the matter, the Secretary said, "We should not get to the point, where we need to consider whether the president can go on issuing debt, this would be a constitutional crisis."
Read more: US debt default would trigger 'economic catastrophe': Yellen
"I don't want to consider emergency options. What's important is that members of Congress recognize what their responsibility is," she added.
"There's simply no good options, and the ones that you have listed are among the not good options."
The Treasury Department is exhausting its available measures to avoid a default and will not be able to do that for long, Yellen added in the interview.
"We've been using extraordinary measures for several months now and our ability to do that is running out."
This comes after a Republican bill to increase the debt limit and cut down on government spending was recently passed after a narrow 217-215 vote in the US House of Representatives - a major win for Republican US House Speaker Kevin McCarthy - but seems to be a struggle at the moment.
His proposal included raising the US debt limit by $1.5 trillion to avert the default of the world's biggest economy.
Yellen has been urging Congress to either suspend or raise the debt limit for the same reason as McCarthy, adding that her agency has started discussing "extraordinary measures" to avoid a default, which the US has never done since the debt ceiling has been raised 22 times between the years 1997 and 2022.​​​​​​​
Nearly half of the House Democrats have expressed fondness for House Speaker's initiative such that it presents a potential compromise between the two parties: inviting Biden to negotiate an agreeable decision with McCarthy.
In January, after the US maxed out its borrowing limit at $31.46 trillion, the US Treasury announced launching "extraordinary measures" to prevent defaulting on debt. Yellen then decided that the Treasury would temporarily suspend payments that aren't urgent and divert the money for more pressing needs i.e. services needed to keep the government operating.
McCarthy is scheduled to attend the White House on May 9 to discuss the debt ceiling bill with Biden, but so far, observers are not optimistic that a solution will be the outcome of the talks.
