In a letter to House Speaker Kevin McCarthy, Treasury Secretary Janet Yellen acknowledged that the United States will reach the statutory limit of the debt ceiling on Thursday and warned against failing to raise the debt limit.
Yellen noted that roughly one year ago, through Public Law 177-73, the federal government had increased the statutory debt limit — the total amount of money the federal government can borrow to meet its legal obligations — including entitlements such as Medicare and Social Security as well as military salaries and interest on the national debt — to roughly $31.381 trillion
Threatening “extraordinary measures” that the Treasury Department would take to guarantee the federal government did not default, Yellen listed two; the first being “redeeming existing, and suspending new, investments of the Civil Services Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund” and the second, “suspending reinvestment of the Government Securities Investment Fund of the Federal Employees retirement system Thrift Savings Plan.”
Yellen posited that increasing the debt limit “does not authorize new spending commitments or cost taxpayers money.”
In September 2021, when the national debt rested at $28.7 trillion, Yellen warned Congress about failing to raise the federal debt limit.
Writing in The Wall Street Journal, Yellen stated:
In a matter of days, millions of Americans could be strapped for cash. We could see indefinite delays in critical payments. Nearly 50 million seniors could stop receiving Social Security checks for a time. Troops could go unpaid. Millions of families who rely on the monthly child tax credit could see delays. America, in short, would default on its obligations.
The U.S. has never defaulted. Not once. Doing so would likely precipitate a historic financial crisis that would compound the damage of the continuing public health emergency. Default could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.
We would emerge from this crisis a permanently weaker nation. For about a century, America’s creditworthiness has been a major advantage over our economic competitors. We can borrow more cheaply than almost any other country, and defaulting would jeopardize this enviable fiscal position. It would also make America a more expensive place to live, as the higher cost of borrowing would fall on consumers. Mortgage payments, car loans, credit card bills — everything that is purchased with credit would be costlier after default.