On Monday afternoon, Secretary of the Treasury Janet Yellen once again sent a letter to House Speaker Kevin McCarthy (R-CA), cautioning him about the increasing risk of the United States defaulting on its debt unless Congress passes a bill to raise the nation’s debt limit. Even though the bill would also need President Joe Biden’s signature, Yellen has consistently directed these letters to McCarthy, despite him and House Republicans already passing a bill that raises the debt ceiling and prevents default.
What is surprising is that Yellen does not send similar letters to President Biden or Senate Majority Leader Chuck Schumer (D-NY). One would think a letter should have been sent to Biden, reprimanding him for ignoring McCarthy’s requests to negotiate earlier this spring as the possibility of default approached. Or perhaps a letter to Leader Schumer, questioning why he and the Democrats in the Senate did not devise a plan to avoid default. However, Yellen’s warnings are exclusively aimed at Speaker McCarthy, who, against expectations, successfully passed a bill with only GOP support to avert default, raise the debt ceiling, and limit discretionary spending at FY 2022 levels, something Democrats had previously boasted about achieving.
McCarthy’s actions have to some extent, compelled Biden to engage in negotiations; this is mostly because the Biden Administration realized he was losing the narrative.
Yellen has increased the pressure in her recent letter to McCarthy, stating that the Treasury Department’s estimation suggests that if Congress does not act to raise or alternatively suspend the debt limit by early June, potentially as early as June 1, the Treasury would likely be unable to meet all of the government’s obligations. Yellen acknowledged that these projections are based on current data but highlighted that federal receipts, outlays, and debt could deviate from these estimates. She assured Congress of her commitment to providing updates as more information becomes available.
Once again, Yellen attempted to admonish McCarthy: History has taught us that delaying the suspension or increase of the debt limit until the last minute can have severe consequences, including damaging business and consumer confidence, increasing short-term borrowing costs for taxpayers, and negatively affecting the United States’ credit rating. Yellen said that they have already witnessed a significant rise in Treasury’s borrowing costs for securities maturing in early June. According to Yellen, failure to raise the debt limit would inflict substantial hardships on American families, harm our global standing, and raise concerns about our ability to safeguard national security interests. She strongly urges Congress to act as soon as possible to safeguard the United States’ full faith and credit.
Clearly, Yellen had forgotten that Congress did take action weeks ago to protect the nation’s full faith and credit when the House passed the Limit, Save, Grow Act. The individuals on Capitol Hill who have neglected their responsibilities appear to be Senate Democrats. Regarding Yellen’s critique of “waiting until the last minute,” that criticism should be directed at President Biden and his advisors in the West Wing. Biden spent two months refusing to engage in negotiations with Speaker McCarthy, which resulted in the absence of a finalized agreement. Had Biden agreed to negotiate earlier, he could have initiated the process two months in advance, thereby averting the last-minute brinksmanship that Yellen now denounces.