Yellen Urges Bipartisan Approach to Debt Ceiling Increase
(Bloomberg) -- Treasury Secretary Janet Yellen is calling on lawmakers to raise the debt ceiling in a bipartisan manner, rather than using a process that would allow it to go through solely with Democratic support.
“In recent years Congress has addressed the debt limit through regular order, with broad bipartisan support,” Yellen said in a Monday statement. “Congress should do so again now by increasing or suspending the debt limit on a bipartisan basis.”
The call presents a challenge to Republicans, who have opposed supporting a debt-limit increase -- one way of highlighting their opposition to Democratic plans to ramp up social spending. One option for Democratic lawmakers has been including a hike in the debt limit in a looming budget resolution that will serve as the vehicle for that social-spending package.
But Senate Democrats left a debt-limit increase out of the text of that resolution. The $3.5 trillion package sets the stage for a so-called reconciliation bill, which only requires 50 votes to pass in the Senate -- removing the need for Republican support.
Until now, President Joe Biden’s administration had been mum on the idea of using reconciliation to increase the debt limit.
Yellen said that “the vast majority of the debt subject to the debt limit was accrued” before the start of Biden’s term.
“This is a shared responsibility, and I urge Congress to come together on a bipartisan basis as it has in the past to protect the full faith and credit of the United States,” she said.
Senate Republican leader Mitch McConnell has said that Democrats’ efforts to pass new spending through reconciliation threaten Republican support for a debt limit increase.
“If they don’t need or want our input, they won’t get our help with the debt limit increase that these reckless plans will require,” McConnell said last week. “I could not be more clear.”
Democrats’ other option would be to convince at least 10 Republicans to vote for the debt ceiling in a stop-gap funding measure that must pass by the end of September to avert a government shutdown.
It’s not yet known how quickly Congress needs to act to avoid a potential default, which would wreak havoc on financial markets and could trigger a downgrade of government credit.
The debt limit, or the total debt the Treasury can issue to the public and other government agencies, snapped back into effect on Aug. 1 when a two-year suspension expired.
Yellen has told lawmakers that Treasury could exhaust its special measures and run out of cash “soon after Congress returns from recess” in September.
The Congressional Budget Office projects that lawmakers likely have a wider window of time -- until October or November -- to raise or suspend the debt limit. The public debt outstanding is currently $28.4 trillion.
Bond market participants warned last week that, under some scenarios, the Treasury may need to execute abrupt declines in issuance of bills -- a crucial component of financial markets.
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