US Treasury Secretary Janet Yellen warned on Wednesday that the government is on track to default on its national debt next month unless Washington increases the debt limit.
“Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligations for the first time in our history,” she wrote in a letter to House of Representatives Speaker Nancy Pelosi.
Citing debt limit impasses in the past, which waited until the last minute, suspending or increasing the debt limit can cause serious harm to businesses and consumer confidence, raise short-term borrowing costs for taxpayers and negatively impact the country’s credit rating, said Yellen.
“A delay that calls into question the federal government’s ability to meet all its obligations would likely cause irreparable damage to the US economy and global financial markets,” she said.
“After the debt limit was reinstated on Aug. 1, Treasury began employing certain extraordinary measures to continue to finance the government on a temporary basis,” said Yellen.
She listed some of the measures, including the suspension of certain investments in the Civil Service Retirement and Disability Fund, Postal Service Retiree Health Benefits Fund and the Government Securities Investment Fund of the Federal Employees’ Retirement System Thrift Savings Plan.
Yellen also noted that the Treasury Department cannot provide a specific estimate of how long these extraordinary measures will last due to uncertainty.
Such uncertainty is a result of challenges about forecasting the payments and receipts of the US government, corporate and individual taxes due Sept. 15, the coronavirus pandemic and related economic relief, she added.
With July and August, it marks the third time Yellen has called for Congress to raise the debt limit.