On September 8, Secretary of the Treasury Janet Yellen warned leaders in Washington that the federal government is at risk of running out of cash by the middle of October. Fearing detrimental impacts on the U.S. economy, Secretary Yellen urged Congress to pass legislation increasing the federal debt limit to facilitate the uninterrupted operations of the federal government. Without a vote to increase the debt limit by Congress, the Treasury will lack the legal authority required to issue bonds and raise the cash needed to fund government activities. Secretary Yellen further warned that even broaching the matter as a legitimate concern could have negative impacts on the U.S. economy. The debt limit had been suspended until July 31, 2021, by the previous administration. Since then, the Treasury has been relying on “extraordinary measures” to ensure U.S. debt obligations are met. Such measures include:
Suspending sales of State and Local Government Series Treasury securities; (2) redeeming existing, and suspending new, investments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund; (3) suspending reinvestment of the Government Securities Investment Fund; and (4) suspending reinvestment of the Exchange Stabilization Fund.
Senate Minority Leader Mitch McConnell stated in early August that his caucus would not support a vote to raise the debt ceiling, placing pressure on Congressional Democrats to find the necessary votes.
The Federal Liaison Center will continue to track this issue as it develops.