Treasury Secretary Yellen Urges Swift Action to Increase Spending Limit, Avert Default on US Obligations

Janet Yellen, the U.S. secretary of the Treasury, sent a letter to Congress on Friday urging lawmakers to increase the spending limit. Yellen stressed that the country would reach its statutory debt limit on Jan. 19, 2023. She warned that “failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.”

Yellen Warns of Approaching Debt Limit, Urges Congress to Act Swiftly

On Friday, Jan. 13, 2023, the United States Treasury published a press release featuring a letter written by Janet Yellen, the 78th U.S. secretary of the Treasury. The letter is addressed to the House of Representatives and the newly appointed 55th speaker, Kevin McCarthy (R-CA).

In the letter, Yellen warns of an approaching debt limit and urges Congress to act swiftly before the nation’s massive borrowing authority of $31.4 trillion is depleted, to avoid defaulting on the country’s obligations. Although, a temporary solution could be utilized to prevent default on U.S. obligations.

Janet Yellen, secretary of the U.S. Treasury (pictured above), sent identical letters to House Democratic leader Hakeem Jeffries, Senate majority leader Charles Schumer, Senate Republican leader Mitch McConnell, chairman of the House Committee on Ways and Means Jason Smith, ranking member of the House Committee on Ways and Means Richard E. Neal, chairman of the Senate Committee on Finance Ron Wyden, and ranking member of the Senate Committee on Finance Mike Crapo.

The Treasury secretary insists that leveraging a process known as “extraordinary measures” could buy Congress more time to increase the U.S. borrowing authority. The process, which is like moving money from one account to another to make sure bills are paid on time, allows the Treasury Department to shuffle money around to prevent the U.S. from defaulting on its obligations. However, Yellen notes that this can only be done for a limited time.

“The period of time that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors,” Yellen wrote. She added, “It is unlikely that cash and extraordinary measures will be exhausted before early June.” The secretary of the Treasury continued:

I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.

During a press briefing on Friday, White House press secretary Karine Jean-Pierre was questioned about the approaching debt limit, and she stated: “We believe, when it comes to the debt limit, it has been done in a bipartisan way over the years and decades,” Jean-Pierre told reporters. “And it should be done in a bipartisan way. And it should be done without conditions. This is important here.”

U.S. stock markets ended Friday in the green, as the four benchmark stock indexes in the U.S. — the Dow Jones Industrial Average (DJIA), S&P 500, Nasdaq Composite, and Russell 2000 all closed higher. Additionally, the top three traded precious metals in the world — gold, silver, and platinum — have been rallying in recent times.

The New York spot price for gold on Friday was approximately $1,921.60 per ounce, up 1.26%, and silver’s price per ounce was around $24.38 at the end of Friday. The global cryptocurrency market cap also rose 4.1% higher on Friday, with BTC jumping above the $21,000 per unit zone. On Saturday, Jan. 14, 2023, bitcoin’s price is coasting along just below the $21K range.

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