Yellen warns US Congress about debt limits

Drama about ceiling height Religion has returned in the last days of US policy because of The Republicans refused to increase the country’s debt Before August 2, at that time the government to take Unusual procedures for paying your bills.

The differences between Democrats and Republicans can be huge Implications for both the global economy and the president’s agenda American, Joe Biden.

In the past hours, US Treasury Secretary Janet Yellen told Congress that on August 2 he will have to take an “emphatic” position. Exceptional measures “to prevent the administration from violating them.” Commitments if Republicans and Democrats fail to reach a an agreement.

Specifically, if that happens, the federal government will have to shut down -As it has happened three times in the past decade – or maybe even incur in default.

Given this possibility, Yellen forwarded a letter she sent on Friday To lawmakers that at the end of July the Treasury It will suspend the sale of bonds, the way the United States finances your debts.

This will be just one of the first “extraordinary measures” It may take the Treasury Department to continue paying bills on time.

To obtain cash, the treasury can also suspend investments In pension programs or borrow directly from those Money and actions you have already taken many times in the past This then lengthened the CEO’s ability to pay during months.

But the situation is different this time because of the administration You spend a lot of money on software to maintain The economy is afloat due to the impact of COVID-19.

In fact, Yellen admitted in her letter that there is “uncertainty.” about how long these “extraordinary measures” can last, To the “challenge” of forecasting government payments and revenue during months into the future, the resulting “uncertainty” of cost epidemic stimulus measures.

According to a July analysis by the Congressional Budget Office, These “extraordinary measures” will allow the United States to get money Until October or November, at that damn time Suspension of sovereign debt payments.

The United States had never been there before, but it was close. In 2011, with Barack Obama in the White House, the majority was then The Republican House of Representatives refused to pass a law To increase the debt ceiling, which unleashed chaos in the markets
It lowered Standard & Poor’s credit rating from the state.

That incident stuck in the memory of the United States and it was The first thing that comes to the minds of many Republicans on Wednesday The Senate threatened to vote against an increase in Debt unless Democrats agree to a series of cuts.

“I can’t imagine increasing one Republican vote “The debt ceiling after what we saw,” he said frankly. Senate Republican Leader Mitch McConnell during an interview With Punchbowl News published on Wednesday.

The Republican Party, traditionally considered a political force From fiscal discipline, he agreed to add $7 trillion to the country’s debt During Donald Trump’s government (2017-2021); But now they argue Biden’s increased spending due to the epidemic is driving the country a dangerous financial situation.

The Democrats responded with anger and their Senate leader, Chuck Schumer called McConnell’s comments “cynical.” and “feeling ashamed”.

“This debt is the religion that Trump created,” he replied from the bike. Schumer, who considered McConnell to use US debt For your “political games”.

This situation around the debt ceiling, which is leading the United States into the abyss Every few years, it happens because the government spends a lot more money from which you receive federal taxes.

In 2021 alone, it is estimated that the government will bear the expenses 5.8 trillion and revenues will be 3.5 trillion, leaving a A deficit of 2.3 trillion, according to the General Budget Officeمكتب Congress.

To finance this difference between expenses and income, the treasury Borrows money by issuing debts.

However, the government can only issue debts up to the maximum established by Congress, which has the power to raise this ceiling in accordance with Creates comfortable. It happened, for example, in July 2019 when the number of members of Congress increased Debt limit until August 2 this year. this is the reason, Now, if lawmakers do not reach an agreement, the government can Running out of money to pay your bills.