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Tipsheet

Janet Yellen Issues New Debt Default Warning

AP Photo/Jacquelyn Martin

The week after the U.S. House of Representatives passed the Limit, Save, Grow Act to raise the debt ceiling to avoid default and cap discretionary spending at FY2022 levels crafted by congressional Democrats and signed by President Joe Biden, Treasury Secretary Janet Yellen issued a new warning.

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In a letter to House Speaker Kevin McCarthy (R-CA) — who already ensured the House did its part in passing the Limit, Save, Grow Act while President Joe Biden's refusal to negotiated passed the two-month mark and Democrat Senate Majority Leader Chuck Schumer failed to put forward a counteroffer — Yellen said that the U.S. would be unable to "satisfy all of the government's obligations...as early as June 1." Previously, Yellen said the "extraordinary measures" she began to avoid default at the start of the new year would last until "early June."

Biden's Treasury secretary also said that a new measure was being taken to try extending the timeline before the U.S. can't meet its obligations: suspending the issuance of State and Local Government Series (SLGS) Treasury securities...special-purpose Treasury securities issued to states and municipalities to help them comply with certain tax rules." Yellen says Treasury's latest action "will deprive state and local governments of an important tool to manage their finances."

Here's more from Yellen's letter

After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government's obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time. This estimate is based on currently available data, as federal receipts and outlays are inherently variable, and the actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates.

It is impossible to predict with certainty the exact date when Treasury will be unable to pay the government's bills, and I will continue to update Congress in the coming weeks as more information becomes available. Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments.

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Continuing, Yellen took a scolding tone toward McCarthy — the only player in the debt ceiling fight who has actually put forward a plan and subsequently passed it with the approval of a majority of Americans' elected representatives in the House — saying "waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short term borrowing costs for taxpayers, and negatively impact the credit rating of the United States."

"If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests," Yellen added, seemingly ignorant of the fact that one-half of Congress, the one run by Republicans, has already voted to raise the debt limit. It is President Biden and Senate Democrats led by Chuck Schumer who are staring down the barrel of stumbling the United States into its first default and set to bear the blame for causing even more hardship to American families and harming America's standing on the world stage. 

Instead of sending letters to McCarthy, Yellen should talk to her boss — Joe Biden — and Chuck Schumer about avoiding default. The ball is in Democrats' court, they just won't pick it up. 

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