U.S. Government Likely to Run Out Of Cash By October Without Act of Congress
September 9, 2021–U.S. Treasury Secretary Janet Yellen wrote another letter to leaders of Congress yesterday, pleading for lawmakers to authorize a higher level of government spending than the $28.7 trillion currently owed.
Having breached the last debt limit long ago, Treasury is relying on extraordinary measures, such as suspension of making payments to certain disability and benefits funds and thrift savings plans, to pay its bills.
Like Yellen’s last letter in July, the Sept. 8 letter does not mention the amount of the current U.S. debt. Neither does it mention that the U.S. government surpassed the last debt limit of $22 trillion long ago.
Congress Waived the Limit in 2019
In 2019, Congress waived its authority to keep the U.S. government within a debt limit. Prior to that, the U.S. debt had doubled in a decade of deficit-spending by Congress and the White House. It was a temporary waiver that lasted until July 31, 2021.
A Global Debt Trend
Global debt soared in 2020 under the pressure of the pandemic. As governments and companies took on unprecedented amounts of debt, total debt swelled over $15 trillion above 2019. As a percentage of the global economy, global debt rose to about 365 percent of GDP.
Today, the United States is leading the trend of amassing debt.
U.S. Bleeds Red in Global Debt
As a percentage of GDP, the U.S. debt is 132.8 percent of its economy. The map below from the IMF depicts that percentage. Looking at the map, it becomes clear that the United States, Canada, Western Europe, and Japan have the worst debt levels in the world.
Yellen Warns of Uncertainty
In her letter, Yellen warned that uncertainty over the debt limit and the U.S. government’s commitment to paying its bills could cause “serious harm” to business and consumer confidence as well as the U.S. credit rating. She estimated that the government will run out of extraordinary measures to fund its operations in October.
“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 wrote. “I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible.”
–U.S. Treasury Secretary Janet Yellen, Sept. 8, 2021
Deficit-Spending Package
Meanwhile, leaders on Capitol Hill are focused on moving President Joe Biden‘s $3.5 trillion economic package through Congress. Democrats are divided on that plan. Republicans, meanwhile, are opposing it as well as the increase in the debt limit. As many as 45 Senate Republicans and 100 House Republicans have signed letters opposing raising the debt limit.
Treasury Secretary Janet Yellen’s Sept. 8, 2021 letter is available here.
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