By John Ikani
US Treasury Secretary, Janet Yellen has warned lawmakers that the government will likely run out of cash and extraordinary measures by October 18.
Ms Yellen’s warnings came as Republicans in the Senate opposed an increase in the borrowing limit.
The United States reached its debt limit of $28.5 trillion in late July and has since been taking “extraordinary measures,” such as stopping investments in federal pension programs, to stop the government from defaulting on its obligations, the White House wrote in a letter to state and local governments on September 17.
If the US defaults, federally funded programs—including disaster relief efforts, Medicaid and infrastructure funding—could all be halted, the White House said.
“Hitting the debt ceiling could cause a recession,” officials wrote, adding economic growth would falter, unemployment would rise and the labor market could lose millions of jobs as the federal government cuts off funding to state and local governments, forcing them to enact budget cuts to keep up with education and healthcare costs.
In a letter to the House Speaker on Tuesday morning, Yellen said recent tax payments for businesses and individuals have made it clear the Treasury would be left with “very limited resources that would be depleted quickly” if lawmakers have not acted on the debt limit by October 18.
Yellen cautioned that it is “uncertain” whether the Treasury will be able to meet the nation’s financial commitments after that date, though she noted the estimate could unexpectedly move backward or forward.
The timeline’s uncertainty “underscores the critical importance” of not waiting to raise or suspend the debt limit, she added, cautioning lawmakers against reaching an impasse by noting that past disagreements have caused “serious harm to business and consumer confidence.”
In the event of lawmakers failing to reach a decision concerning the matter, Moody’s Analytics projected a loss of nearly six million jobs and volatility in stock prices, also projecting a halt in paying federal workers, healthcare benefits, military salaries, tax refunds, and social security checks.