“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Treasury Secretary Janet Yellen wrote to top U.S. lawmakers.
Yellen has said it’s “unlikely that cash and extraordinary measures will be exhausted before early June.”Just before World War II, Congress gave the Treasury almost unlimited power to decide what securities to sell and how to best manage the nation’s debt — subject to an overall limit.
Since then, fighting to raise the federal borrowing limit to pay for spending already approved by Congress and presidential administrations has become a Washington ritual.When the U.S. Treasury exhausts its cash and extraordinary measures, the federal government loses any means to pay its bills and fund its operations beyond its incoming revenues, which only cover part of what is required.
She will also issue a “debt issuance suspension period” beginning Thursday and lasting through June 5.Though the U.S. has never defaulted before, an actual default could have “dramatically negative impacts on a wide range of financial assets including U.S. bonds, equities and the dollar,” said David Kelly, chief global strategist at JPMorgan Funds, in a note on Tuesday.
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