Updated: Apr 29
Brian Gornick, Staff Writer
U.S. Treasury Secretary Janet Yellen during the Senate Appropriations Subcommittee. Photo: Greg Nash/Pool via REUTERS//File Photo
U.S. Treasury Secretary Janet Yellen stated in an interview with CNN that the United States has until January 19 to raise the debt limit or else the U.S. will be forced to default on its debt.
As Congress is split between a GOP-led House and a Democrat-controlled Senate, the calls to raise the debt ceiling will be met with resistance as the need to compromise becomes ever present.
“Presidents and Treasury secretaries of both parties have made clear that the government must not default on any obligation of the United States, and, as noted, Treasury secretaries in every administration over recent decades have used these extraordinary measures when necessary,” Yellen said in a letter to House Majority Speaker Kevin McCarthy on Friday.
The announcement of the U.S. hitting the debt ceiling on the 19th comes to the surprise of many financial experts. The debt ceiling was widely predicted to be reached in the summer of this year, giving Congress ample time to figure out a solution.
If Congress fails to reach an agreement over raising the debt ceiling by the 19th, it will result in the United States being forced to default on its debt, which many argue would have dire consequences on the economy.
Alec Philips, chief political economist of Goldman Sachs, told the New York Times last week that the United States breaching the debt ceiling would be immediately taking out 1/10th of the U.S. economy.
Others also have sounded the alarm about the raising of the debt ceiling. Researchers at Third Way, a Democratic think tank, estimated that a breach of the debt ceiling would kill three million jobs, as well as balloon the national debt by $850 billion.
While Democrats argue that raising the debt ceiling is the best way to avoid a catastrophe, Republicans in Congress argue that the best plan of action is to decrease the government’s spending in order to lower the national debt, keeping the ceiling stagnant. One thing is for certain. The fight to avoid the U.S. economy faltering into default will be a tough journey over the next week.