Treasury Secretary Calculates The United States Will Default on Its Debts on October 18th
United States Treasury Secretary Janet Yellen warned lawmakers on Tuesday that her department’s “extraordinary measures” to avoid a debt default will be exhausted by October 18th if Congress fails to raise the debt ceiling, the Associated Press has reported.
“We now expect that Treasury is likely to exhaust its extraordinary measures if Congress has not acted to raise or suspend the debt limit by Oct. 18. At that point, we expect Treasury would be left with very limited resources that would be depleted quickly,” Yellen wrote in a letter to leaders on Capitol Hill, imploring them to “protect the full faith and credit of the United States by acting as soon as possible.”
The economic consequences of a first-ever default would be “devastating,” Moody’s Analytics warned in a dire report last week.
“The hit to consumer, business, and investor confidence would be severe,” the entity cautioned. “If the impasse over the debt limit lasts through all of November, the Treasury will have no choice but to eliminate a cash deficit of approximately $200 billion by slashing government spending. Annualized, this is equal to more than 10% of GDP. The economic blow would be devastating.”
Yellen hammered that message in her Tuesday letter.
“We know from previous debt limit impasses that waiting until the last minute can cause serious harm to business and consumer confidence, raising borrowing costs for taxpayers and negatively impact the credit rating of the United States for years to come,” Yellen said. “Failure to act promptly could also result in substantial disruptions to financial markets, as heightened uncertainty can exacerbate volatility and erode investor confidence.”
The specter of a partial government shutdown is also hovering over Washington because the federal government will run out of money on September 30th unless Congress passes a continuing resolution.