Treasury Secretary Yellen to Congress: Alter debt limit or go broke

Treasury Secretary Janet Yellen sent a letter to House of Representatives Speaker Nancy Pelosi yesterday urging her to act on the debt ceiling of the U.S. government, or, go completely broke.

This effort comes as the two year debt ceiling freeze, which began in 2019, recently ended on Aug. 1. Without taking action on this matter, the U.S. government will be forced to default its financial obligations for the first time in history.

Yellen provided a singular estimate in the letter, that “…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.”

Yellen urges action to prevent “irreparable damage” to US economy, global financial markets

At the onset of her letter, Yellen makes note of the fact that she has been addressing this issue for quite some time and nothing has been resolved. She said, “I am writing to follow up on my previous letters regarding the debt limit and to provide additional information regarding the Treasury Department’s ability to continue to finance the government in the absence of Congressional action to address the debt limit.”

Made clear by her introductory considerations, Yellen has attempted to address this issue numerous times. Instead of resolution, she’s received an “absence of Congressional action.”

Yellen notes in the letter that previous endeavors in this direction were met with “broad bipartisan support.” Besides that, the Treasury Secretary also mentioned the context proving why action must be taken.

“At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk.” stated Yellen, considering how the nation’s image and ability will be affected without action being taken to this end.

One portion of Yellen’s letter includes a nod to what she’s learned from past mistakes. She asserted, “…waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.”

Without a choice made, just a slight decision on this matter, the government and the people it’s meant to represent will both crumble.

Nearly 185 years of debt

Irresolution on behalf of Congress to this point is somewhat of an outlier when compared to previous instances of forestalling the national debt. Since 1917, Congress has raised, extended, or altered the debt ceiling nearly a hundred times and it hasn’t once been lowered.

This game of catch up has been going on since 1835, the last time the U.S. was debt-free. During that time, President Andrew Jackson managed to deplete the national debt with an abundance of federal land sales and the Tariff of 1828.

The debt-free period only lasted two years, and ended with a grueling depression. Beyond that, the debt miring the U.S. today has remained a constant; trailing behind governmental operations for nearly 185 years.