In a letter to House Speaker Kevin McCarthy, who is currently engaged in a debate with President Joe Biden and Senate Democrats on the matter, Yellen stated that “[o]ur best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1 if Congress does not raise or suspend the debt limit before that time.”
Biden and the Democrats rejected McCarthy’s and the House Republican majority’s demand for expenditure cutbacks and reforms in return for lifting the debt limit, preferring a debt hike without restrictions.
Republicans are criticized in Yellen’s letter for holding the country’s economy “hostage” and putting the country at danger of a debt default, echoing Democratic criticism against them. She continued by stating that a “last-minute” rise in the debt limit prior to June 1 would “seriously harm business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.”
The letter comes shortly after House Republicans passed the Limit, Save, Grow Act, which raises the debt ceiling by $1.5 trillion in exchange for spending decreases on Democratic priorities like repealing tax breaks for green technology under the Inflation Reduction Act (IRA) and the Biden-Harris Student Debt Relief Initiative. Even though the majority of Republicans had backed the legislation, it was only narrowly passed because some lawmakers opposed eliminating IRA ethanol subsidies. McCarthy’s Most Recent Debt Victory May Not Be Enough (RELATED: WILFORD)
Democratic Senate Majority Leader Chuck Schumer referred to the Limit, Save, Grow Act as “dead on arrival” in the Senate.
State and Local Government Series (SLGS) Treasury securities, which are issued by the federal government to assist states and municipalities comply with local tax laws but count against the debt limit, were also announced to be suspended by the Treasury Department in Yellen’s letter.
McCarthy has attempted to force Biden and Democrats to engage with him about his suggested budget cutbacks in an effort to break the deadlock, but his efforts have so far been fruitless.
“The White House must eventually participate in this dialogue. For the last two months, the president has been hiding. The American people will not tolerate that. House Majority Leader Steve Scalise stated on ABC that people want the president to start negotiating, not hiding, in a room with Speaker McCarthy.
