With the domestic debt authorized by law at $31,400 million, the Treasury Department is struggling tooth and nail to get its lift as it sits just over $31,000 million this Friday. That means the government could shut down its activities in a matter of days.
In a letter to Republican House Speaker Kevin McCarthy, Treasury Secretary Janet Yellen “respectfully” urged Congress to act quickly to “protect America’s full guarantee” by raising the debt ceiling.
Such “extraordinary measures” could help reduce the amount of outstanding debt subject to the $31.4 billion ceiling, but the Treasury Department warned that these tools would only help for a limited time, likely no longer than six months.
“I respectfully urge Congress to act quickly to protect America’s full guarantee,” Treasury Secretary Janet Yellen said in a letter to Republican House Speaker Kevin McCarthy.
Yellen said last week that “failure to meet government obligations would irreparably damage the US economy, the livelihoods of all Americans and global financial stability.”
Kevin McCarthy. Photo: WBFO.
A default would damage the credibility of the United States, which should never happen, the executive chairman of JPMorgan Chase, one of the country’s largest banks, has warned.
“We should never question the solvency of the United States government,” Jamie Dimon said in an interview with CNBC. “It’s sacrosanct. It should never happen.”
But now a dispute between McCarthy and the White House has been settled. Republicans are seeking deep public spending cuts, the largest by any government in the country’s history.
Conservatives argue that sweeping cuts are needed to reduce borrowing, which Congress has generally approved increasing each year to raise the so-called debt ceiling.
However, the White House has said these cuts would hurt key military and social spending programs or mean new taxes.
The White House also pledged that Biden would not negotiate with hard-line Republicans given their “risky and dangerous” opposition to raising the debt ceiling, which has happened regularly in recent decades. But McCarthy has a dilemma: He has to strike a deal with Biden anyway, and, as The Hill put it, he has to “think outside the box” to get anything done.
So it was necessary to pressure Democrats to sit down to talk, even if hardline Republicans oppose it.
“Defense needs more than 800,000 million, are there areas where I think they could be more efficient? Yes, eliminate all money spent on social causes. Take away all the money they’re spending finding other fuels and worry about the environment they’re going through,” McCarthy said.
While that notion is likely to meet with a chilly reception in the Democratic-led Senate, it comes at a time when the Republican leader is trying to balance potentially conflicting demands while navigating the House of Representatives with a slim Republican majority.
“There’s evidence he knows how to negotiate,” Republican strategist Rob Stutzman said of McCarthy. But, he added, “His problem was that he had to deal with too many people just because of the circumstances.”