Treasury Secretary Janet Yellen warned that her department will effectively run out of cash around Oct. 18 unless legislative action is taken to suspend or increase the federal debt limit, putting pressure on lawmakers to avert a default on U.S. obligations.
“We now estimate that Treasury is likely to exhaust its extraordinary measures if Congress has not acted to raise or suspend the debt limit by October 18,” Yellen said in a letter Tuesday to congressional leaders. “At that point, we expect Treasury would be left with very limited resources that would be depleted quickly. It is uncertain whether we could continue to meet all the nation’s commitments after that date.”
Yellen’s letter comes a day after Republican senators blocked legislation, attached to a stopgap spending measure, that would have suspended the debt ceiling until December 2022. That left Democrats no clear alternative to overcome the Senate filibuster except using a budget procedure that could take nearly two weeks.
Following the Senate’s 48-50 vote, Majority Leader Chuck Schumer didn’t immediately signal Democrats’ next step, instead castigating Republicans for “one of the most reckless, one of the most irresponsible votes I have seen taken in the Senate.”
The GOP maneuver sets the stage for a protracted debate over debt that Republican lawmakers hope will help them portray Biden’s expanded child tax credits, paid family leave and new benefits for Medicare recipients as out-of-control government spending. An eventual Democrat-only vote to raise the debt limit would provide fodder for election attack ads.
‘Tanking’ economy
Democrats as of late Monday hadn’t given up on the idea of forcing Republicans to join them to address the issue, however—raising the risks of financial-market distress as the Treasury’s deadline for running out of cash looms.
Democratic Senator Chris Van Hollen of Maryland dismissed the idea of going through the convoluted process and predicted Republicans would eventually go along with a debt ceiling increase.
“They’ll have that on their hands,” Van Hollen said of a debt crisis. “It’s going to be pretty obvious to the American public after we vote on this a couple of times between now and then that they’re tanking the economy.”
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