US Treasury Secretary Janet Yellen has called on Congress to quickly set a new debt ceiling to avert a potentially catastrophic default.
If the US government can no longer service its debt, the economy and the livelihoods of Americans are in danger of “irreparable damage,” Yellen warned in Washington on Friday. Therefore, it had never happened regardless of the ruling party.
The current debt ceiling expires at the end of July, which means that the US government can no longer make new debts to pay its expenses. From August, the Treasury would have to resort to “extraordinary measures” to prevent a default, Yellen warned.
Because of the economic consequences of the pandemic, it is very uncertain how long the government can finance itself in this way. On 1 October alone, there would be statutory payments of 150 billion US dollars (127.5 billion euros).
USA threatens to run out of money
The Independent Congressional Budget Office (CBO) estimates that without a new debt ceiling, the government would “most likely” run out of money in October or November. Without an agreement, the ceiling will fall back to the value of 2019 in August, 22 trillion dollars, plus the debt accumulated since then, around 6,5 trillion. The new ceiling would therefore be about 28,5 trillion dollars (24,2 trillion euros), explains the CBO.
So far, Republicans and Democrats have still agreed on an increase in the border – although often after much shaking and several rounds of negotiations. President Joe Biden’s Democrats control the House of Representatives, but in the Senate they rely on the support of Republicans. The economic consequences without an agreement could be enormous for the US, the global economy and the stability of the financial system.
