(Bloomberg) — Treasury Secretary Janet Yellen said she will tell Congress “within the next day or two” about how long lawmakers should raise or suspend the debt limit before the government runs out of money.
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“We might be able to get past December 3, we might have the resources to do that, but not much time after that,” Yellen said in an NPR interview taped Monday.
Since last month, the Treasury has been using so-called extraordinary measures to help avoid running out of cash. The department said earlier this month that it used up to $182 billion of about $369 billion in cash saved through such measures.
Lawmakers enacted a short-term debt-reduction push last month, with the goal of giving enough room to coincide with a separate deadline, Dec. 3, for regular annual funding for federal government agencies. At the time, Yellen said the legislation would allow the government to continue paying its bills through December 3. Dates are subject to change based on the Treasury’s spending and revenue streams.
“I will soon be releasing new guidance on what we’ve learned since then about how long this can take,” Yellen said.
Year-end Treasury yields rose after Yellen’s comments, as investors demanded slightly higher interest rates on December 28 and December 30.
Congressional leaders have yet to outline a plan for how to address the ceiling in the coming weeks.
A few Republican senators voted to allow Democrats to push ahead with a short-term payment of $480 billion to the maximum in October, which was eventually passed along the party line. But they pledged that they would not cooperate in any increase in the future. Senate Republican Leader Mitch McConnell is pressing Democrats to raise the bar themselves using the reconciliation process, which bypasses the Senate’s disruption and thus the need for Republican support.
Majority Leader Chuck Schumer has resisted going this route, arguing that raising the debt ceiling should be a bipartisan measure as it was during the Trump administration.
“We’re focused on doing that in a bipartisan way,” Schumer said on Tuesday.
But other Democrats have expressed openness to going it alone.
While Yellen has repeatedly called for a bipartisan vote to address the debt limit, she has also suggested in recent weeks that Democrats consider raising the limit themselves through reconciliation.
“I firmly believe it is a bipartisan responsibility to do this,” Yellen said on November 1, adding, “there is a way for the Democrats to do it on their own,” and “and I know that would be one way — through reconciliation — that the leadership would consider it.” .
Senate Budget Chairman Bernie Sanders of Vermont rebuked Republicans, saying they “understand it would be incredibly irresponsible to drive the entire global economy into chaos by not repaying the debts they incurred under the Trump administration.”
But he did not rule out the use of reconciliation. “We will consider all options,” he said.
On Tuesday, McConnell said he was not worried about the looming deadline.
“We will find out how to avoid default,” he said. “We always do.”
If the treasury runs out of cash, the US government will default on its financial obligations. Yellen warned that contractors and federal employees would not be paid and Social Security checks would stop, among other things. Unless their payments are prioritized, treasury bond investors will not receive interest payments or get their principal back on bills, bonds and bonds payable.
Yellen, Federal Reserve Chairman Jerome Powell, and several economists have warned that even a temporary default can send credit markets into chaos, raise US borrowing costs for an extended period, and damage US credibility around the world. Yellen has repeatedly said that a recession will be in the pipeline.
Meanwhile, Congress also faces a deadline in the coming weeks to prevent a federal government shutdown. The agencies have been funded through the Temporary Interim Appropriations Act since the beginning of October 1 of the fiscal year, and it is likely that the so-called continuing resolution will be after that law expires on December 3.
(Updates with comments from Schumer, Sanders, and McConnell beginning in the ninth paragraph)
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