In a Letter to Congress on Friday, Treasury Secretary Janet Yellen warned that the statutory debt limit will be hit the following week and urged legislators to raise or extend the ceiling in a “timely manner” to prevent extensive economic harm.

Failure to fulfill the government’s responsibilities would hurt the American economy, all Americans’ livelihoods, and the stability of the global financial system, according to Yellen.

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The long-awaited milestone, which will see the nation’s borrowing capacity of nearly $31.4 trillion drained, is anticipated to intensify the current congressional discussion on raising the country’s borrowing capacity.

Many Republicans have pledged to resist any efforts to raise borrowing limits in the next months unless significant expenditure cuts are made, while Democrats have sworn not to engage in any negotiations on the subject.

The procedure known as “extraordinary measures,” which will start on Thursday, allows the Treasury Department to simply shuffle money around in order to prevent a real default on U.S. commitments. However, this solution is only effective for a limited time.

Yellen said on Friday that “the length of time that exceptional measures may persist is subject to significant uncertainty owing to a number of reasons.” The specific date that the United States will be unable to pay its bills would not given by Yellen, although she did add that it was doubtful that cash and exceptional measures would run out before early June.

On December 15, 2022, US Treasury Secretary Janet Yellen and Senegal President Macky Sall had a meeting during the US-Africa Leaders Summit at the Walter E. Washington Convention Center in Washington, DC. (Image credit: SAUL LOEB / AFP) (Image courtesy of S. LOEB/AFP via Getty Images)
Janet Yellen, the Treasury Secretary, was in Washington in December. Getty Images (SAUL LOEB/AFP)
“Do not panic,” was said.
Other organizations predicted that the United States could only keep its borrowing capacity for a little while longer.

The “X date,” which is when exceptional measures expire and is constantly monitored by the Bipartisan Policy Center, is predicted to occur in the third quarter of 2023. However, the organization issues a warning that the forecasts are out of date and may alter in the next weeks based on the budget projections that will be made public shortly.

“This is not the time to worry; it will be several months until the United States cannot fulfill its promises, “After the letter was made public on Friday, Shai Akabas, the center’s head of economic policy, made a statement.

Akabas stated that both sides would probably need to make some concessions. The moment has come, according to Akabas, for policymakers to start serious discussions.

Yellen explained in her letter how some of the early exceptional measures would have an immediate impact on the Federal Employees Retirement System Thrift Savings Plan, the Postal Service Retirees Health Benefits Fund, and the Civil Service Retirement and Disability Fund of the U.S. Government.

Akabas clarified on Friday that the Treasury is permitted to use these accounting tricks and that, for the time being, no one’s retirement payments are anticipated to be affected.

After the debt ceiling issue is addressed, the three funds “will be made whole,” according to Yellen.

GOP members of the House are vowing to “scrutinize every dollar spent.”
By the summer, it is anticipated that the stakes on this topic would be higher overall.

The upcoming conflict is often contrasted with 2011 when a drawn-out dispute over the matter resulted in losses in U.S. equities markets. One of the “actual damages” noted by Yellen in her letter on Friday was the sole lowering of the United States’ credit rating in history, despite the fact that the conflict was swiftly resolved.

Some analysts believe the outcome this time may be far worse.

Yellen also warned Congress in her letter on Friday that programs including Social Security payouts, tax refunds, and military pay would all be affected by a default.

Policymakers have proposed a variety of strategies to avert the impending catastrophe, from esoteric political procedures to White House unilateral initiatives. However, House Republicans have pledged to keep up the pressure and carry the talks as far as they are able to go.

Speaker Kevin McCarthy (R-CA) repeated his intentions to use the debt limit as leverage and threatened to “scrutinize every dollar spent” by the Biden administration in the coming years during a news conference on Thursday.

On January 12, 2023, U.S. Speaker of the House Kevin McCarthy (R-CA) addresses the media in the U.S. Capitol in Washington, D.C. Elizabeth Frantz for Reuters
Speaking to reporters in the US Capitol on January 12 is Speaker of the House Kevin McCarthy (R-CA).
The White House and other Democratic leaders have repeatedly said that they would not engage in any debt ceiling negotiations.

This week’s Press Secretary Karine Jean-statement Pierre’s to reporters that “Congress is going to need to lift the debt ceiling without restrictions” was one recent instance of the White House rejecting discussions.

The senior Democrat on the House Budget Committee, Rep. Brendan F. Boyle (D-PA), slammed Republicans on Capitol Hill for “believing it’s appropriate to exploit our economy as a political hostage.”

“I call on Congress to take swift action to safeguard the United States full confidence and credit, “Finally, Yellen said in her letter on Friday.

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