U.S. to hit debt limit on August 1, Yellen warns

 

U.S. Treasury Secretary Janet Yellen on Friday urged Congress to raise the debt limit as soon as possible to avoid a potential default.

The U.S. government will hit the federal borrowing limit on August 1, forcing officials to take “extraordinary measures” until lawmakers raise the limit; Yellen warned in a letter to Democratic and Republican lawmakers in Congress.

She stressed that raising the debt limit does not increase spending but simply allows Treasury to finance actions already approved by the legislature.

“Failure to meet those obligations would cause irreparable harm to the U.S. economy and the livelihoods of all Americans,” she added.

Congress suspended the debt limit in 2019 but that exemption expires in about two weeks.

The U.S. national debt has soared during the COVID-19 pandemic; after Washington approved three massive spending bills aimed at lessening the damage from its economic impacts.

The nonpartisan Congressional Budget Office (CBO) said the national debt as of the end of June was $28.5 trillion; and this year’s budget deficit will be $3 trillion, second only to the record deficit in 2020.

Yellen’s letter came after the CBO warned on Wednesday that the United States is at risk of a default in October or November unless Congress raises or suspends the debt limit.

“If that occurred, the government would be unable to pay its obligations fully, and it would delay making payments for its activities; default on its debt obligations, or both,” the CBO said.