The US Treasury is likely to exhaust measures to keep funding the government on October 18, and will run out of cash unless Congress raises the federal borrowing cap, Treasury Secretary Janet Yellen warned Tuesday.
After the date, “Treasury would be left with very limited resources that would be depleted quickly. It is uncertain whether we could continue to meet all the nation’s commitments after that date,” she said.
Republicans in the US Senate have refused to support an increase or suspension of the debt ceiling, despite having pressed for it under their party’s former president Donald Trump.
On Monday, they blocked a Democratic effort to approve a 14-month suspension together with a temporary budget.
The House passed a measure last week to keep the government open until December 3 while they continue debate on a major 10-year social spending package, but the evenly divided Senate has refused to start debating the bill.
Without an increase, the government would be unable to pay salaries of public workers, send payments to retirees, or service the nation’s debt.
Yellen again warned that prompt approval is critical since “waiting until the last minute can cause serious harm to business and consumer confidence, raise borrowing costs for taxpayers and negatively impact the credit rating of the United States for years to come.”
“Failure to act promptly could also result in substantial disruptions to financial markets, as heightened uncertainty can exacerbate volatility and erode investor confidence,” she said.
Raising the debt limit does not increase spending, but simply allows Treasury to finance projects already approved by Congress.
Senate Republican leader Mitch McConnell has used the debt limit as a political bludgeon to protest President Joe Biden’s spending plans, and says Democrats must raise the ceiling without opposition support.
Under Trump, the ceiling was suspended for two years on a bipartisan basis after McConnell at the time argued that failing to do so would be a disaster.
The cap was reinstated on August 1 with the country’s debt at $28.4 trillion.