(TheRedAlertNews.com) – Treasury Secretary Janet Yellen has warned Congress that the US government is now projected to reach its debt limit and run out of money as early as June 1 unless lawmakers increase or suspend it by then.
The federal government technically hit the debt ceiling of $31.4 trillion in January, but the Treasury Department has been implementing “extraordinary” measures to prevent it from binding.
In her letter to the US Senate and House of Representatives leaders on Monday, Yellen insisted that the legislature should “protect the full faith and credit of the United States by acting as soon as possible” to address the $31.4 trillion limit on its legal borrowing authority.
“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” the Treasury Secretary wrote, as quoted by AP and Newsmax.
Meanwhile, on Monday, the Treasury Department also unveiled plans to boost borrowing in the second quarter of 2023 even though it was “close to breaching the debt limit.”
Thus, the US government plans to borrow $726 billion during the second quarter, which is $449 billion more than projected in January.
That has resulted from a lower cash balance, lower income tax receipts, and higher spending.
According to Treasury officials, political debates over raising the ceiling carry greater risk for America’s financial position than other factors, such as the effects of Russia’s war against Ukraine.
“Even if Congress ultimately raises the debt limit before a default occurs, the ensuing uncertainty could raise borrowing costs and induce other financial stress that would weaken our labor market and our standing in the world,” commented in a statement acting US Assistant Treasury Secretary of Economy Policy Eric Van Nostrand.
While Biden and congressional Democrats insist on the unconditional raising of the borrowing limit, the Republican majority in the House of Representatives has recently passed a bill providing for substantial spending cuts in exchange for its agreement to a debt ceiling hike.
“Congress must vote to raise or suspend the debt limit, and it should do so without conditions and it should not wait until the last minute. I believe that is a basic responsibility of our nation’s leaders to get this done,” Treasury Secretary Yellen said at the Cap-to-Cap policy conference in Washington last week.
Biden has rejected the Republican plan to reduce spending over the next decade, claiming it would harm working families financially and benefit oil and gas industries.
Senate Majority Leader Chuck Schumer has called the GOP bill a “far-right ransom note.”
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