The US government will run out of money at some point in October unless Congress acts to increase the federal borrowing limit, Treasury Secretary Janet Yellen said on Wednesday.
Congress suspended the debt limit in 2019, but the two-year suspension lapsed July 31, resetting the cap at $28 trillion and forcing Treasury to begun taking “extraordinary measures” to continue funding government operations without breaching the limit.
In a letter to House Speaker Nancy Pelosi, Yellen warned that if the ceiling was not raised, “the United States of America would be unable to meet its obligations for the first time in our history.”
“Based on our best and most recent information, the most likely outcome is that cash and extraordinary measures will be exhausted during the month of October,” she wrote.
The country’s debt and deficit have soared during the Covid-19 pandemic after Washington approved three massive spending bills aimed at lessening the damage from its economic impacts.
Raising the debt limit does not increase spending, but simply allows Treasury to finance projects already approved by Congress. Without an increase Washington could face an unprecedented default on payments.
Congress is currently considering a $1.2 trillion infrastructure plan as well as a massive social spending plan costing $3.5 trillion, both of which would push spending even higher.
While Congress is controlled by President Joe Biden’s Democratic party, they will need votes from Republican lawmakers to raise the borrowing limit, but the opposition party has so far said they are against it.
Raising the debt ceiling has been a contentious issue in Congress for the past several years, and a 2011 standoff caused US sovereign debt to lose the coveted AAA rating.
