The United States is projected to reach its roughly $31.4 trillion borrowing limit in less than a week, Treasury Secretary Janet Yellen said on Friday, sharing the debt estimate in a letter to Republican Speaker Kevin McCarthy.
After Republicans took back control of the lower chamber last week, a high-stakes fight looms over the further Congress over raising the debt ceiling with McCarthy pressing for any action to address the debt ceiling to be tied to spending cuts sought by Republicans.
More than a century ago, Congress set a level to curtail government borrowing so the debt limit is the maximum that the federal government is allowed to borrow.
House Majority Leader, Republican Steve Scalise, said earlier this week that if an increase in the limit is asked for at some point in time, one must sit down before and ask himself why was the limit hit at the first place, why is the credit card maxed out?
The Senate, where Democrats still hold control, will most likely create trouble for the GOP proposals for significant cuts.
At the same time, Yellen also warned that the US could default on its debt as soon as June, pointing out that the Treasury would soon take extraordinary measures for a limited amount of time – such as temporarily redeeming existing and suspending new investments of the Civil Service, Retirement and Disability Fund – to buy time for Congress to find a bipartisan solution and to stave off a default.
Noting it’s unlikely cash and extraordinary measures will run out before early June, Treasury Secretary underscored that after the debt limit impasse has ended, those funds would be “made whole.”
She also pressed for Congress to act in a timely manner to raise or suspend the ceiling, warning that if the government fails to meet its obligations, it would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability.