WASHINGTON, Jan 13 (Reuters) – U.S. Treasury Secretary Janet Yellen said on Friday the United States will likely hit the $31.4 trillion statutory debt limit on Jan. 19, forcing the Treasury to launch extraordinary cash management measures that can likely prevent default until early June.
“Once the limit is reached, Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations,” Yellen said in a letter to new Republican House of Representatives Speaker Kevin McCarthy and other congressional leaders.
She urged the lawmakers to act quickly to raise the debt ceiling to “protect the full faith and credit” of the United States. “While Treasury is not currently able to provide an estimate of how long extraordinary measures will enable us to continue to pay the government’s obligations, it is unlikely that cash and extraordinary measures will be exhausted before early June,” the letter said. Republicans now in control of the House have threatened to use the debt ceiling as leverage to demand spending cuts from Democrats and the Biden administration. This has raised concerns in Washington and on Wall Street about a bruising fight over the debt ceiling this year that could be at least as disruptive as the protracted battle of 2011, which prompted a brief downgrade of the U.S. credit rating and years of forced domestic and military spending cuts. The White House said on Friday after Yellen’s letter that it will not negotiate over raising the debt ceiling. “This should be done without conditions,” White House spokesperson Karine Jean-Pierre told reporters. “There’s going to be no negotiation over it.” House Republicans are planning to move a “debt prioritization” measure by the end of March that would call on the U.S. Treasury to continue making certain payments once it reaches the debt ceiling, but details have not been finalized, a person familiar with the plan told Reuters. The proposal was first reported by the Washington Post. Republican lawmakers in the United States House of Representatives are preparing a contingency plan that would be put into place if a deal on raising the debt ceiling fails, the Washington Post reported. According to six unnamed sources, the plan is part of a deal conservative Republicans reached with Kevin McCarthy during his campaign for speaker of the House. The report claimed that, if the debt ceiling is breached, Republicans “would call on the Biden administration to make only the most critical federal payments,” including debt payments, social security and Medicare, and military funding. Two people familiar with the discussions said that “it could take weeks for Republicans to decide which federal spending programs must be protected.” NN: I normally do not comment on the debt ceiling charade. But with the new Republicans that have blown into town and the weak speaker this could blow into a big deal!