7/25/21 If We Don't Raise the Debt Limit, the U.S. Risks Default, Yellen Says

Back in the 1970s, Latin American countries were defaulting on their loans in the face of a tough global economy. They had to agree to austerity measures. Their already struggling economies tanked. Inflation hit double digits and then got worse. These nations were miserable and unstable for years.

The U.S. is not far from taking the same path, warns Treasury Secretary Janet Yellen, because a two-year suspension of the debt limit will end on July 31.

“In recent years Congress has addressed the debt limit through regular order, with broad bipartisan support,” Yellen wrote in a letter on Friday. “I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible.”

As you may imagine, GOP legislators jumped on this tidbit like a swarm of flies, with Mitch McConnell vowing to tie the measure to spending cuts. But Yellen's letter reminded Congress that rating agencies downgraded the nation's credit rating during the 2011 debt ceiling standoff. It was the first time in U.S. history. That was when Obama was president and GOP stonewalling was in full force.

The same clown car is still running us off the rails. One hopes that the GOP will remember how big a deal this really is. With this Senate, though, petty quarrels could take precedence over the financial stability of the nation. That is a scary prospect.

In the past, Congress has in fact failed to raise the debt limit in a timely manner, and the Treasury has done enough financial gymnastics to keep the U.S. out of default.

This time, the pandemic makes it tougher. Yellen says she cannot predict precisely how long the U.S. can hold off default. The Congressional Budget Office thinks the Treasury can hold out till October or November, but Yellen says the Big Bag of Treasury Tricks may be exhausted by the end of September.

Just what we needed -- another nail-biter full of grandstanding intransigence by the party of No.  

https://thehill.com/policy/finance/564562-yellen-to-congress-raise-the-debt-ceiling-or-risk-irreparable-harm