Janet Yellen says US to hit debt limit next week, eyes ‘extraordinary measures’
- The Treasury secretary says her actions will buy time for Congress to raise the nation’s burrowing authority, but warned of the dangers of a government default
- Past forecasts suggest a default could instantly bury the country in a deep recession, right at a moment of slowing global growth
Treasury Secretary Janet Yellen notified Congress on Friday that the US is projected to reach its debt limit on Thursday and will then resort to “extraordinary measures” to avoid default.
In a letter to House and Senate leaders, Yellen said her actions will buy time until Congress can pass legislation that will either raise the nation’s US$31.4 trillion borrowing authority or suspend it again for a period of time.
Those measures include divesting some payments, such as contributions to federal employees’ retirement plans, to provide some headroom to make other payments that are deemed essential, including those for Social Security and debt instruments.
“Failure to meet the government’s obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability,” she said.
“Indeed, in the past, even threats that the US government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”