United States Treasury Secretary Janet Yellen shared grave news with congressional leaders on Tuesday. Apparently, the United States government is on track to run out of money by mid-October. To avoid this financial disaster, Democrats are clinging to hope that Republicans will vote to raise or suspend the national debt limit. However, that option is looking unlikely.
“…we know from previous debt limit impasses that waiting until the last minute can cause serious harm to business and consumer confidence, raise borrowing costs for taxpayers, and negatively impact the credit rating of the United States for years to come,” Janet wrote in a letter.
What Is The National Debt Limit?
According to Forbes, the debt limit functions like credit for the government. It determines how much the government can borrow to pay its bills. Forbes compared not raising the debt limit to maxing out a credit card. Some of the bills the government has includes: “Social Security payments, military and federal employee salaries, and tax refunds,” plus interest on older bills. Without a raise or suspension, missed and late payments are possible. This could cause ripple effects in the stock market as well.
“We could see indefinite delays in critical payments,” Janet wrote in a Wall Street Journal op-ed last week. “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.”
What Is The Deadline To Act ?
In Tuesday’s letter, Janet detailed that the US government will “exhaust its extraordinary measures” by October 18. She also warned that this date is simply an estimate. This means the date could “unpredictably shift forward or backward” if the government has unexpected or lessened expenses.
“It is uncertain whether we could continue to meet all the nation’s commitments after that date,” Janet wrote.
Her warning came a few hours after Senate Republicans blocked a bill that would’ve suspended the debt limit. The stopgap bill addressed two current financial issues: government funding and the debt limit.
CNN reports that government funding is set to expire on September 30, but the bill sought to extend the date through December 3. The bill also would’ve suspended the debt limit through December 16, 2022.
What Are Leaders Doing About It?
Although it passed the House, Republicans shut it down on Monday with a 48-50 vote. Senate Majority Leader Chuck Schumer initially voted yes, but change his vote to no. No other Republicans voted for the measure. Most blame Biden adminstration spending for the current situation, however Janet refuted that claim in her Wall Street Journal article.
“Even if the Biden administration hadn’t authorized any spending, we would still need to address the debt ceiling now.”
If the U.S. reportedly defaults on its debt, Americans are also facing changes in the stock market, interest rate spikes and hits to the economy.
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