US Treasury Secretary Janet Yellen
Photo: JONATHAN ERNST / REUTERS
US Treasury Secretary Janet Yellen has called on Congress to quickly set a new debt ceiling in order to avert a potentially catastrophic default.
If the US government is no longer able to service its debts, the economy and livelihoods of the Americans are threatened with "irreparable damage," Yellen warned in Washington on Friday.
That is why it has never happened regardless of the party in power.
The current debt ceiling expires at the end of July, which means that the US government can no longer incur any new debt to pay its expenses.
From August onwards, the Ministry of Finance would have to take “extraordinary measures” to prevent a default, Yellen warned.
Because of the economic consequences of the pandemic, it is very uncertain how long the government can finance itself.
On October 1 alone, there would be statutory payments of 150 billion US dollars (127.5 billion euros).
USA threatens to run out of money
The Independent Congressional Budget Bureau (CBO) estimates that without a new debt ceiling, the government "most likely" would run out of money in October or November. Without an agreement, the cap will fall back to its 2019 level in August, $ 22 trillion, plus the debt accumulated since then, around $ 6.5 trillion. The new upper limit would therefore be around $ 28.5 trillion (24.2 trillion euros), explains the CBO.
So far, Republicans and Democrats have still agreed to raise the limit - albeit often after trembling and several rounds of negotiations.
President Joe Biden's Democrats control the House of Representatives, but in the Senate they rely on Republican support.
The economic consequences without an agreement could be enormous for the US, the world economy and the stability of the financial system.
mjm / dpa