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 a letter to her mother. What Is The Debt Ceiling For The United States? The debt ceiling, according to Forbes, acts as a line of credit for the government. It establishes the maximum amount of money the government can borrow to fulfill its bills. According to Forbes, not extending the debt limit is equivalent to maxing out a credit card. “Social Security payments, military and federal employee paychecks, and tax refunds,” as well as interest on older invoices, are among the bills the government possesses. Missed or late payments are possible without a rise or suspension. This may have repercussions in the stock market as well.“
Critical payments could be delayed indefinitely,” Janet wrote in a Wall Street Journal op-ed last week. “For a period, over 50 million seniors could lose their Social Security benefits. It’s possible that troops will get underpaid. There could be delays for millions of families who rely on the monthly child tax credit.” What Is The Acting Deadline? Janet outlined in her letter of Tuesday that the US government will “exhaust its extraordinary measures” by October 18. She also cautioned that this date is only a guess. This means that the deadline could “unpredictably slip forward or backward” if the government incurs unexpected or lower costs.
“It’s unclear whether we’ll be able to meet all of the country’s obligations after that date,” Janet wrote. Her warning came just hours after Senate Republicans blocked a bill that would have lifted the debt ceiling suspension. Two current financial challenges were addressed in the interim bill: government funding and the debt ceiling. Government funding is slated to expire on September 30, according to CNN, but the bill seeks to extend it until December 3. The debt ceiling would have been suspended until December 16, 2022, under the bill.
What Are Leaders Doing to Address the Issue? Despite the fact that it passed the House, Republicans shut down the government on Monday with a 48-50 vote. Senator Chuck Schumer, the majority leader in the Senate, first voted yes, but afterwards changed his vote to no. There were no other Republicans who voted in favor of the bill. Most people blame the current crisis on the Biden administration’s spending, but Janet challenged this notion in her Wall Street Journal piece. “We would still need to face the debt ceiling today even if the Biden administration had not authorized any spending.”
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.
