Lawmakers may need to raise or suspend the statutory debt limit sometime before the end of October in order to avoid missed payments on U.S. financial commitments, which could have sweeping effects throughout the economy.
Treasury Secretary Janet L. Yellen wrote to congressional leaders on Wednesday that the "most likely outcome" is the agency's cash balance and so-called extraordinary measures to remain under the statutory debt ceiling will be "exhausted during the month of October."
While she couldn't pinpoint a more specific time frame, Yellen wrote that lawmakers shouldn't wait until the last minute, given the potential impact on consumer confidence, borrowing costs and potentially the U.S. credit rating.
That gives congressional leaders and the Biden administration little time to negotiate an agreement that can clear both chambers during the coming weeks, especially since Republicans remain mostly opposed to approving another extension of the debt limit.
Senate Minority Leader Mitch McConnell has said Democrats should raise the debt limit through the reconciliation process they are using to advance a $3.5 trillion spending package. The Biden administration and Democratic leaders have remained committed to addressing the borrowing limit through the traditional legislative process, however, which would require at least 10 Senate GOP votes if Democrats in that chamber remain united.
Speaker Nancy Pelosi and Senate Majority Leader Charles E. Schumer said separately Wednesday morning that they have several options for addressing the debt limit but wouldn't provide specifics. Each seemed to rule out amending the budget resolution to add reconciliation instructions for a debt limit increase, though Pelosi was more emphatic.
"I'm not here to talk about where we would put the debt limit, but it won't be on reconciliation, as I mentioned," Pelosi said.
Schumer called GOP opposition to raising or suspending the debt ceiling "despicable" while implying Democrats would need their votes. "It would be just the height of irresponsibility for Republicans to play games, to take the debt limit hostage," he said.
But Schumer later hinted at keeping his options open. "We have a number of different ways we’re going to look at getting the debt ceiling done. We must get it done and stay tuned," he said.
One option could be to attach a temporary suspension of the debt limit to the stopgap government funding bill that Congress must approve to avoid a shutdown before the new fiscal year begins on Oct. 1. The White House on Tuesday called for lawmakers to add at least $24 billion to address natural disasters and $6.4 billion to help relocate Afghan refugees to that short-term measure, which could make it difficult for Republicans to oppose.
That could be a risky game of chicken between the parties, however. If President Joe Biden doesn’t sign a stopgap bill before Oct. 1, a partial government shutdown would begin and the country could keep inching closer to a default that would likely have a negative impact on the economy.
Whatever the vehicle, Yellen urged lawmakers to avoid waiting much longer to reach a bipartisan agreement on the debt ceiling. She wrote that a delay could call “into question the federal government’s ability to meet all its obligations” and would “likely cause irreparable damage to the U.S. economy and global financial markets.”
“At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk,” Yellen wrote.
Lindsey McPherson contributed to this report.