If the U.S. debt ceiling will not be raised until July 31 or the borrowing limit will not be suspended, the country is waiting for default and “irreparable harm” to the economy. This was stated by U.S. Treasury Secretary Janet Yellen in a letter to Congress.
Yellen reminded that the debt ceiling is frozen until July 31, but if no action is taken, the debt will peak by August 1.
“If Congress does not act by Monday, August 2, 2021, to freeze or raise the debt ceiling, the Treasury Department will have to begin taking certain additional extraordinary measures to prevent the United States from defaulting on its obligations,” the Treasury secretary said in a letter.
The secretary recalled that if the debt ceiling is not raised or frozen, by the beginning of the new fiscal year, by October 1, the ability of the United States to pay its debts will be undermined. Yellen noted that a default “would cause irreparable damage to the U.S. economy and the economic situation of all Americans.” The secretary then added that the threat of default in 2011 hurt the U.S. economy when the country’s credit rating was downgraded for the first time in history.
“For this reason, no president or Treasury secretary from either party has ever allowed even the thought of a U.S. default on any of its obligations,” the secretary added, urging Congress to take any action soon.
On July 1, the Congressional Budget Office (CBO) projected that the U.S. federal budget deficit in fiscal year 2021, which began Oct. 1, 2020, is expected to reach $3 trillion, noting that the amount is $130 billion less than in 2020, but three times as large as in 2019.