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Yellen presents parliamentary emergency measures on debt restrictions.

By on July 23, 2021 0

Washington (AP) – Treasury Secretary Janet Yellen told Congress on Friday that the government will start taking urgent action to protect the government from unprecedented defaults on government bonds. Means of subsistence. “

Yellen said in a letter to House and Senate leaders that his actions will take time until Congress passes a bill to increase debt limits or suspend again for a period of time.

The debt limit has been suspended for two years and will come into effect again on July 31. The total debt subject to the limit is currently $ 28.4 trillion.

Yellen said the first decision on July 30 was to stop selling state and municipal securities. These securities are used by some local authorities to meet some of their financing needs, but increase the level of debt held by the federal government.

If Congress increases its debt limit or does not act to suspend it by August 2, Yellen “will take certain additional special measures to prevent the United States from failing to meet its obligations.” “.

Yellen said in the letter that even the threat of default was something the United States had never done before, causing the United States’ first credit downgrade. It happened in 2011 when the Standard & Poor’s rating agency downgraded some of the US debt during a conflict between Republicans in Congress and the Obama administration.

“This is why neither the president nor the treasury secretary of either party has ever met even a proposal not to meet US obligations,” Yellen wrote.

However, Senatorial Minority Leader Mitch McConnell, R-Ky. Threatened this week that all Republican senators will vote against expanding government borrowing power. He cited opposition to President Joe Biden’s plan to increase domestic spending and raise taxes for the rich.

If that happens, Senate Democrats lack the 10 GOP supporters needed to overcome Republican obstructions, or delay tactics and move those languages ​​to the Senate 50-50 with 60 votes. ..

The Democratic Party has yet to decide on a legislative strategy to deal with the impasse of debt restrictions.

However, Yellen’s letter could lead them to include a provision to extend the debt ceiling in a bill that Congress must approve by October 1 to prevent a government shutdown that day. The usual spending bill for lending to federal agencies for the fiscal year beginning Oct. 1 is unlikely to have passed by then.

This tactic could result in both a federal shutdown and default if Republicans dare to block the bill and fail. Most politicians will hate to be blamed for such events, especially around election year.

In response to Mitchell’s comment this week, Senate Leader Chuck Schumer, DN.Y. Called them “shameless, cynical and completely political”.

It is the Secretary of the Treasury that Yellen uses “special measures” to refer to the use of “special measures” to allow governments to meet their obligations to repay debt and pay for benefits such as security. social. Refers to the various accounting operations that have been used in the past.

This includes withdrawing funds from accounts that pay retirement benefits to public servants. When the debt ceiling is processed, it replaces funds withdrawn from various government accounts.

Yellen said the unusual circumstances surrounding the government’s response to the coronavirus pandemic made it difficult to predict when she would run out of cockpits. She said that in some scenarios, the ability to continue borrowing could end soon after Congress returns from the August vacation.

She faces a specific challenge on October 1, when government resources are expected to decline by around $ 150 billion due to large mandatory payments, including Pentagon-related pensions and necessary investments in medical assistance. Noted.

White House spokeswoman Jen Psaki said on Friday that the US government had never authorized defaults, saying it would be a “catastrophic event”.

“We expect Congress to act quickly to increase or suspend its debt limits,” Saki told reporters. “We will protect the credibility and credibility of the United States. “..

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White House PA reporter Josh Boak contributed to this report.

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