The US government is almost at its debt ceiling. If Congress does not raise the federal loan limit, the government is expected to run out of money on October 18, the US Treasury Secretary warned. “It is uncertain whether we will be able to continue to meet all the obligations of the country after that date,” says Janet Yellen.
The Republicans in the US Senate have so far refused to support an increase or suspension of the debt ceiling, even though they had insisted under their party’s former President, Donald Trump. On Monday, a Democratic attempt to approve a 14-month suspension was blocked, along with a temporary budget.
Without an increase in the debt ceiling, the government would not be able to pay the salaries of civil servants, make payments to pensioners or pay the debts. Yellen again warned that rapid approval for raising the limit is critical, as
“..waiting until the last minute can seriously damage business and consumer confidence, increase borrowing costs for taxpayers, and negatively affect the US creditworthiness for years to come.”
She also warned of the impact on the financial markets if clarity is not provided immediately. As uncertainty increases, it could cause major market fluctuations and undermine investor confidence, she said. Raising the debt limit does not lead to increased spending, but merely allows the ministry to finance projects that have already been approved by Congress.
Republican Senate Leader Mitch McConnell uses the debt limit as a political weapon to protest president Joe Biden’s spending plans. Under Trump, the debt ceiling was suspended for two years with the approval of both parties. McConnell argued at the time that failure to do so would be “a disaster”. The debt ceiling was reset on August 1 when the US debt stood at 28.4 trillion dollars.