• Janet Yellen, the U.S. Secretary of the Treasury, sent a letter to Congress on Friday urging an increase in the spending limit.
• She warned that failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.
• Secretary Yellen suggested leveraging a process known as „extraordinary measures“ to buy Congress more time before the nation’s borrowing authority is depleted.
On Friday, January 13, 2023, the United States Treasury published a letter written by Janet Yellen, the 78th U.S. Secretary of the Treasury, to the House of Representatives and the newly appointed 55th Speaker, Kevin McCarthy (R-CA). In the letter, Yellen warned of an impending debt limit, which is set to be reached on January 19, 2023, and urged Congress to act swiftly to increase the nation’s borrowing authority of $31.4 trillion in order to avoid defaulting on the US obligations.
Secretary Yellen stated that failure to meet the government’s obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability. She suggested leveraging a process known as “extraordinary measures” to buy Congress more time before the nation’s borrowing authority is depleted. The same letter was sent to House Democratic leader Hakeem Jeffries, Senate majority leader Charles Schumer, Senate Republican leader Mitch McConnell, chairman of the House Committee on Ways and Means Jason Smith, ranking member of the House Committee on Ways and Means Richard E. Neal, chairman of the Senate Committee on Finance Ron Wyden, and ranking member of the Senate Committee on Finance Mike Crapo.
The Treasury Secretary’s plea to Congress to take swift action comes at a time when the US government is facing the largest budget deficit in its history, projected to reach $3.3 trillion in 2020. The COVID-19 pandemic and the resulting economic recession have further contributed to the deficit, as the government has spent billions of dollars on stimulus packages to help individuals, businesses, and state and local governments.
Increasing the spending limit is likely to be a contentious debate in Congress in the coming weeks. Lawmakers will have to decide whether the increase should be accompanied by spending cuts, revenue increases, or some combination of both. It is also possible that Congress could resort to extraordinary measures in order to buy more time to avoid defaulting on US obligations.
It is clear that Yellen’s letter will put pressure on Congress to take action soon in order to prevent further economic harm. The Secretary of the Treasury has made her stance clear–failure to act swiftly could result in dire consequences for the US economy and the livelihoods of all Americans.