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Yellen Warns of U.S. Government Default

She sees risk of default as early as October, if Congress fails to act on a debt-limit hike when the two-year suspension ends on Saturday.

By Christopher Condon | July 27, 2021 at 07:29 PM
Photo: Janet Yellen

Secretary Janet Yellen said the Treasury Department will begin special steps next week to avoid breaching the U.S. debt limit as a two-year suspension of the ceiling ends, and urged lawmakers to act “as soon as possible” to avert a payment default.

There are scenarios in which the Treasury could exhaust its special measures and run out of cash “soon after Congress returns from recess” in September, Yellen said Friday in a letter to lawmakers. She said cash and such measures are expected to decrease by $150 billion on October 1 alone “due to large mandatory payments.”

Yellen’s warning strikes a more urgent note than a Congressional Budget Office (CBO) report issued Wednesday saying U.S. lawmakers likely have until October or November to raise or suspend the debt limit. She said the Treasury is unable to provide its own specific estimate of how long so-called extraordinary measures would last amid “heightened uncertainty” over payments and receipts during the coronavirus pandemic.

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