U.S. Treasury Secretary Janet Yellen has a dire warning for Democrats and Republicans who have been squabbling about whether to raise the national debt ceiling for months now.
If the debt ceiling isn’t raised by October, she said, the U.S. could default on its massive debt for the first time in its history.
“Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligations for the first time in our history,” Yellen said in a letter to Congress on Wednesday.
Yellen said that “extraordinary” measures could be used for a short time and that they would likely run out in October, though she and other treasury officials didn’t know exactly how long the measures could extent the U.S. borrowing ability.
Restraining Democrat spending
Republicans have reasoned that raising the debt ceiling is only encouraging Democrats to spend trillions of dollars on every spending bill, and think that if they refuse to raise the debt ceiling it will restrain them.
Democrats see the issue as a way to blame Republicans if a default causes issues in the economy and global markets.
If the U.S. does default on its debts, it would likely cause a raise in the interest rate for future borrowing and could cause interest rates for consumers to rise as well.
The debt ceiling had been suspended through August 1 because of the pandemic, and Yellen had asked for the ceiling to be raised at that time to prevent this situation from occurring.
“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,” Yellen wrote.
“At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk,” she continued.
It seems that neither Yellen nor Democrats have considered the obvious alternative to raising the debt ceiling: cut spending, or at least don’t increase it any more.
It’s about time the U.S. learned to do what most American households are required to do on a regular basis: live within their means and not spend more than they take in.