US Treasury Secretary Janet Yellen suggested on Thursday that the US government may have a few days of cash left after the October 18 date she gave earlier this week before a potential default linked to the debt limit.
“It will be impossible for Treasury on that day, or a few days thereafter” to pay the nation’s bills since cash flow will be “limited” and “will be run down quickly,” she said in response to questions during a hearing before the US House Financial Services Committee, where she testified alongside Federal Reserve Chairman Jerome Powell.
Ms Yellen also said she would support a permanent repeal of the debt limit — as opposed to the temporary suspension under consideration now — and reiterated that a default would be a “catastrophe” for the country.
“When Congress legislates expenditures and puts in place tax policy that determines taxes, those are the crucial decisions Congress is making,” Ms Yellen said.
“And, if to finance those spending and tax decisions, it's necessary to issue additional debt, I believe it's very destructive to the president and myself, the treasury secretary, in the situation where we might be unable to pay the bills that result from those past decisions.”
The comments offer more specificity than Ms Yellen’s letter to Congress on Monday, when she said that “estimates regarding how long our remaining extraordinary measures and cash may last can unpredictably shift forward or backward.” She also wrote that after October 18, “we expect Treasury would be left with very limited resources that would be depleted quickly.”
Ms Yellen said during her testimony on Monday that she hoped the debt limit could be raised on a bipartisan basis.
"Senators, the debt ceiling has been raised or suspended 78 times since 1960, almost always on a bipartisan basis," Ms Yellen said before the committee on Tuesday.
"My hope is that we can work together to do so again and to build a stronger American economy for future generations."
Separately on Thursday, Senate Democratic Majority Leader Chuck Schumer ratcheted up pressure on Republicans in their feud over raising the national debt limit, announcing he will seek a vote “as early as next week” on House-passed legislation suspending the legal ceiling, which came back into effect August 1 following a two-year hiatus.
Senate GOP Minority Leader Mitch McConnell argues that Democrats alone are responsible for raising the limit since they are pursuing a partisan multitrillion-dollar tax and spending plan. Mr McConnell on Tuesday blocked a motion raised by Mr Schumer that would’ve allowed addressing the debt limit with a majority vote.
Mr Schumer accuses Republicans of trying to “dine and dash” on the cost of their 2017 tax cuts and wants their fingerprints on the vote to raise the debt ceiling.
The debt-limit fight has become part of a struggle between the parties to shape public perceptions of President Joe Biden’s agenda heading into next year’s midterm congressional election.
If the US Congress does not address the debt limit, the US would default for the first time in its history.
- Bloomberg contributed to this report