U.S. Will Hit Debt Limit Jan. 19, Yellen Tells Congress
The Treasury Department expects to begin taking “extraordinary measures” to continue paying the government’s obligations ahead of what’s expected to be a big fight to raise the borrowing cap.
By Alan Rappeport and Jim Tankersley, The New York Times, Jan. 13, 2023
Treasury Secretary Janet L. Yellen warned on Friday that she would have to begin employing “extraordinary measures” to continue paying the nation’s bills this month if lawmakers do not act to raise the statutory debt limit and that her powers to delay a default could be exhausted by early June.…“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,” Ms. Yellen wrote…[end quote]
I can’t say more without getting into politics. In fact, the entire subject of the debt limit is political.
Congress has already allocated the money that Treasury must raise by selling Treasury debt. Treasury has ZERO power to change Congress’ expenditures since the Constitution gives the power to spend (and tax) to Congress.
The debt limit only limits Treasury’s ability to raise the money needed to meet the expenditures that Congress has already made. If Treasury is limited in how much it can pay the government’s obligations the U.S. would default for the first time in history.
This would be catastrophic for markets all over the world.
Batten down the hatches, folks. There could be a monumental market storm in June.
Wendy
