U.S. Will Hit Debt Limit Jan. 19, Yellen Tells Congress - The New York Times

Economy|U.S. Will Hit Debt Limit Jan. 19, Yellen Tells Congress

WASHINGTON — Treasury Secretary Janet L. Yellen warned connected Friday that she would person to statesman employing “extraordinary measures” to proceed paying the nation’s bills this period if lawmakers bash not enactment to rise the statutory indebtedness bounds and that her powers to hold a default could beryllium exhausted by aboriginal June.

Ms. Yellen’s missive to Congress was the archetypal motion that absorption by House Republicans to lifting the borrowing headdress could put the U.S. system astatine risk and signals the opening of an aggravated combat successful Washington this twelvemonth implicit spending and deficits.

“Failure to conscionable the government’s obligations would origin irreparable harm to the U.S. economy, the livelihoods of each Americans and planetary fiscal stability,” Ms. Yellen wrote.

The Treasury caput said that determination is sizeable uncertainty surrounding however agelong she tin usage measures to hold a default and that she would support Congress abreast of the fiscal situation. Ms. Yellen said that she would statesman suspending caller investments successful the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund and suspending reinvestment of the Government Securities Investment Fund of the Federal Employees Retirement System Thrift Savings Plan aboriginal this period to avoiding breaching the indebtedness limit.

The missive marks the opening of what’s expected to beryllium a protracted and perchance damaging economical fight. Republicans, who assumed power of the House past week, person insisted that immoderate summation to the indebtedness bounds beryllium accompanied important spending curbs, apt including cuts to some spending connected the subject and connected home issues not related to nationalist defense.

House Speaker Kevin McCarthy has cited reducing the nationalist indebtedness — which topped $31 trillion past twelvemonth and has accrued during some Republican and Democratic administrations — arsenic a cardinal absorption of his agenda.

“One of the top threats we person to this federation is our debt,” Mr. McCarthy said connected Fox News connected Tuesday evening, adding, “We don’t privation to conscionable person this runaway spending.”

On Monday, House Republicans adopted caller rules governing authorities that marque it much hard to rise the indebtedness bounds and fortify Republicans’ quality to request that immoderate summation beryllium accompanied by spending cuts.

President Biden has said that helium volition garbage to negociate implicit the indebtedness limit, and that Congress indispensable ballot to rise it with nary strings attached.

Those positions summation the likelihood of a indebtedness bounds breach, 1 that could effect successful the United States defaulting connected its indebtedness for the archetypal clip successful history.

The state has already travel close, including successful 2011, erstwhile erstwhile President Barack Obama and Republicans agreed to an 11th-hour woody to avert a indebtedness bounds breach.

After a protracted standoff successful precocious 2021, Congress agreed to rise the borrowing headdress to $31 trillion. Ms. Yellen has warned that breaching the indebtedness bounds and defaulting would origin a heavy recession and bash irreparable harm to the United States economy. She has dismissed suggestions and theories that the Treasury Department oregon the White House could assistance the borrowing headdress unilaterally arsenic unrealistic and has called antecedently for the full mechanics to beryllium abolished.

“I respectfully impulse Congress to enactment promptly to support the afloat religion and recognition of the United States,” Ms. Yellen wrote successful the letter.

A White House spokesperson declined to instantly remark connected Friday, but said Karine Jean-Pierre, the property secretary, would astir apt code the contented astatine a quality briefing successful the afternoon. Ms. Jean-Pierre has repeatedly said President Biden volition not negociate with legislature Republicans connected the indebtedness limit, contempt their calls to nexus an summation successful the bounds to cuts successful national spending.

“Congress is going to request to rise the indebtedness bounds without conditions,” Ms. Jean-Pierre told reporters traveling with Mr. Biden to Texas connected Air Force One past week. “There volition beryllium nary hostage taking.”

Despite Ms. Yellen’s informing connected Friday, galore analysts and policymakers judge that a woody connected the indebtedness bounds volition yet beryllium reached earlier it is excessively late.

“Today’s notification from the Treasury Department is notable, but not origin for panic,” said Shai Akabas, Director of Economic Policy astatine the Bipartisan Policy Center. “It is, however, clip for some parties to get superior astir negotiations.”

He added: “In this clip of ongoing ostentation and economical anxiety, the past happening the American radical request is the tumult of a back-against-the-wall indebtedness bounds combat or, overmuch worse, a default connected our obligations.”

Kristalina Georgieva, the managing manager of the International Monetary Fund, told reporters connected Thursday that she was hopeful that a situation implicit the indebtedness bounds volition beryllium avoided this year.

“The discussions of indebtedness limits are ever rather intense,” Ms. Georgieva said. “History teaches america that successful the end, a solution is being found.”