Treasury Secretary Janet Yellen told congressional leaders on Monday that she would extend extraordinary cash management measures to temporarily finance the U.S. government until December 3, the new deadline for lawmakers to raise or suspend the debt ceiling or risk a first-ever default.
Congress last week approved the long-term debt limit increase, adding the borrowing limit by $480 billion after a short-term battle. The deal which Yellen said provided temporary reprieve did nothing to solve the broader stalemate between Democrats and Republicans over the debt, likely bringing another showdown at the end of the year.
It is imperative that Congress act to increase or suspend the debt limit in a way that provides longer-term certainty that the government will fulfill all its obligations, Yellen wrote in the letter.
The number is around $28.4 trillion.
For months, GOP lawmakers attempted to put the onus of raising or suspending the debt limit on Democrats, arguing that with a power monopoly in Washington, the party should go it alone using the budget reconciliation process. Democrats countered that there was not enough time to use reconciliation with the U.S. careening toward a catastrophic default and noted they had voted twice with Republicans during the Trump administration to suspend the ceiling.
Despite the deal, Senate Minority Leader Mitch McConnell has not dropped his policy that Democrats eventually use reconciliation to raise the ceiling after December and warned he would not help increase the debt limit again.
I will not be a party to any future effort to mitigate the consequences of Democratic mismanagement, Biden wrote in a scathing letter addressed to President McConnell. Your lieutenants on Capitol Hill now have the time they claimed they lacked to address the debt ceiling. If the U.S. failed to raise or suspend the debt limit, it would eventually have to default on some of its obligations, which could seriously impact its economic position in the long term. Interest rates would likely spike, and demand for Treasurys would drop. Even the threat of default can cause borrowing costs to increase.
Yellen pays his bills on time, in a recent Wall Street Journal op-ed. The overwhelming consensus among economists and Treasury officials of both parties is that failure to raise debt limit would produce widespread economic catastrophe.