In a Monday letter to congressional leaders, Yellen announced that while a recent increase to the debt ceiling will probably keep the U.S. solvent through Dec. 3, “it is imperative that Congress act to increase or suspend the debt limit in a way that provides longer-term certainty that the government will satisfy all its obligations.”
“I respectfully urge Congress to act to protect the full faith and credit of the United States,” Yellen stated.
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The secretary announced that Treasury will proceed to hold off on investments in the Civil Service Retirement and Disability Fund (CSRDF) and Postal Service Retiree Health Benefits Fund (PSRHBF) that are not needed to fund benefits for current recipients until the debt ceiling is raised or suspended beyond Dec. 3.
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President Biden signed Thursday a bill to increase the federal debt limit by $480 billion, which Yellen explained “provides a high degree of confidence” that the Treasury will be able to pay expenses as they come due until Dec. 3. A short-term deal to fund the federal government will further lapse then, setting up a potential dual fiscal crisis less than three weeks before Christmas.
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The debt ceiling was reimposed Aug. 1 when a two-year budget deal struck under former President Trump expired. Yellen warned in September that the U.S. was on track to default Monday if Congress did not raise or suspend the debt ceiling.
Raising or suspending the debt ceiling does not influence future congressional spending or the size of the national debt. Instead, doing so enables the Treasury Department to pay expenses already passed over several decades by presidents and lawmakers by issuing bonds to generate cash.
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The U.S. has never defaulted and would probably trigger an untold economic and financial disaster if it missed a debt payment for the first time in history. Even so, Republicans have declared that Democrats have to raise the debt ceiling on their own through the budget reconciliation process.
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While Democrats could raise the debt ceiling by a specific amount with just Democratic votes through budget reconciliation, it further requires an uncapped number of amendment votes that could cause future legislative or political challenges. Therefore, Democrats insist that Republicans have to stand back from their unprecedented filibuster of debt ceiling legislation and allow a bill to pass through regular order with just Democratic votes.
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Republicans briefly relented from their blockade earlier this month after Senate Minority Leader Mitch McConnell (R-Ky.) reached a deal with Senate Majority Leader Charles Schumer (D-N.Y.) to allow a $480 billion debt ceiling hike to advance. Though the ensuing backlash from GOP senators, McConnell’s effort to get enough Republicans on board with the deal and a subsequent victory speech inspired the minority leader to rule out further deals.
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