“In recent years Congress has addressed the debt limit through regular order, with broad bipartisan support,” Yellen said in a Monday statement.“Congress should do so again now by increasing or suspending the debt limit on a bipartisan basis.”
Democratic leaders in Congress have been eying a go-it-alone approach that would incorporate a debt limit increase into a budget process, known as reconciliation, that only requires 50 votes to enact in the Senate. That possibility has drawn ire from Republicans, setting up a potential partisan showdown over the matter.
Yellen’s comments come just before Senate Democrats are set Monday to release their $3.5 trillion budget resolution, the potential debt limit vehicle.
Until now, President Joe Biden’s administration has been mum on the idea of using reconciliation, which could serve to pass large parts of Biden’s economic agenda, to increase the debt limit.
Yellen added that “the vast majority of the debt subject to the debt limit was accrued” before the start of Biden’s term.
“This is a shared responsibility, and I urge Congress to come together on a bipartisan basis as it has in the past to protect the full faith and credit of the United States,” she said.
Senate Republican leader Mitch McConnell has said that Democrats’ efforts to pass new spending through reconciliation threaten Republican support for a debt limit increase.
“If they don’t need or want our input, they won’t get our help with the debt limit increase that these reckless plans will require,” McConnell said last week. “I could not be more clear.”
Democrats’ other option would be to convince at least 10 Republicans to vote for the debt ceiling in a stop-gap funding measure that must pass by the end of September to avert a government shutdown.
It’s not yet known how quickly Congress needs to act to avoid a potential default, which would wreak havoc on financial markets and could trigger a downgrade of government credit.
The debt limit, or the total debt the Treasury can issue to the public and other government agencies, snapped back into effect on Aug. 1 when a two-year suspension expired.
Yellen has told lawmakers that Treasury could exhaust its special measures and run out of cash “soon after Congress returns from recess” in September.
The Congressional Budget Office projects that lawmakers likely have a wider window of time — until October or November — to raise or suspend the debt limit. The public debt outstanding is currently $28.4 trillion.
Bond market participants warned last week that, under some scenarios, the Treasury may need to execute abrupt declines in issuance of bills — a crucial component of financial markets.
Read more: The Debt-Ceiling Farce Is a Headache Investors Could Do Without
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Source: Economy - investing.com
