On Tuesday, Treasury chief Janet Yellen warned congressional leaders that the United States government possibly run out of money to pay its bills on 18th October if the government not raised the debt ceiling. Further, she said that the absence of a congressional vote to end the debt ceiling of the U.S., wither to a specific quantity or to some extended date to allow continuous borrowing.
Additionally, Finance Ministry officials expect that the country will be left with very limited resources that will soon run out in the next three weeks. The Democratic Senate Majority Leader, Chuck Schumer, tried but failed to win unanimous backing to hold a simple majority vote in the hundred-member chamber to raise the debt ceiling instead of the sixty-vote edge needed for most major legislation.
Janet Yellen is saying that Congress needs to raise the US Treasury’s debt ceiling to avoid “catastrophe.” Try calling your credit card company up and using the same argument. How about Congress stops spending to avoid “catastrophe.”
— Brian Wesbury (@wesbury) September 20, 2021
However, Republican leaders blocked the recent effort to raise the borrowing limit, just as on Monday they beat legislation that also would avoid a partial government closure beginning on Friday. The debt of the federal government now stands at around $28.4 trillion, but the United States, virtually alone among administrations internationally, has for decades forced limits on its borrowing or sometimes lifted the debt ceiling until some specific date.
Senate Republicans Blocked the Measure to Raise the Debt Ceiling
Congress always raised the debt ceiling of the country or lifted it completely for some time to prevent the United States from defaulting on its debts, averting a global financial crisis produced by the most extensive global economy. However, now the U.S. is facing a new cash crisis without congressional approval for more borrowing. The governments usually designed long-term borrowing to pay for previously congressional approved measures over the years, including relief supported by both Democratic and Republican representatives in the last year to help the American economy recover from the COVID-19 pandemic.
On Monday, the Senate Republican leaders blocked the Democratic-supported move to raise the debt ceiling, opposing that a new debt limit would allow for a way of spending the opposition of Republicans, as more as $3.5 trillion that Joe Biden, the U.S. President, and several congressional Democratic leaders support to provide the most significant expansion of American social safety net programs since the 1960s. In a letter to congressional leaders, Yellen expressed that the everyday cash flow of the government varies extensively, from approximately $50 billion per day over the last year to as more as $300 billion.
Prevention of a Partial Government Shutdown
She said that as a result, it is important to remember that estimations about how long the Biden government remaining extraordinary moves and cash may last can unpredictably shift backward or forward. The ambiguity highlights the critical importance of not waiting to increase or suspend the debt limit. She said that the entire credit and faith of the country should not be put at risk. Yellen further added that previous debt limit standoffs of the country reveal that waiting until the last moment can cause serious harm to consumer confidence and business, negatively impact the credit rating of the U.S. for coming years and increase borrowing costs for taxpayers.
Failure to act sharply may also result in considerable disruptions to the country’s financial markets, as mounted uncertainty can worsen instability and gradually destroyed investor confidence. On Monday, the Senate Republicans rejected the legislation, and it would also stop a partial government shutdown on 1st October, Friday, the start of a new fiscal year for the federal government. Instead, Republican leaders say they will back stand-alone legislation to keep Biden government operating into December while dialogs continue, but not a move combining it with a rise in the debt ceiling.