US Treasury Secretary Janet Yellen has urged Congress to raise the debt limit, noting that the Treasury Department will run out of money, and measures it can take will be exhausted by October.
In a letter to House Speaker Nancy Pelosi, Ms Yellen said once the debt limit was instated on 1 August, the department took extraordinary measures to finance the government temporarily, such as suspending investments in retirement funds for federal employees.
“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,” the letter read.
Ms Yellen said the department is uncertain how long these measures can last given the lack of corporate and individual taxes due on 15 September, and the pandemic.
“However, based on our best and most recent information, the most likely outcome is that cash and extraordinary measures will be exhausted during the month of October,” she said.
The Treasury Secretary, who is also the former chairwoman of the Federal Reserve, said waiting until the last minute to raise the debt limit can hurt consumer and business confidence, raise the short-term borrowing costs for taxpayers and affect the credit rating of the US government.
“I again note that Congress has addressed the debt limit in recent years through regular order, with broad bipartisan support,” she said.
Ms Yellen’s warning also comes as Congress has to pass legislation to fund the government, as the US fiscal year ends on the first day of October. Similarly, Congress is looking to pass both the bipartisan infrastructure bill the Senate passed this summer and a broad social welfare package known as the budget reconciliation package.