(Finance) – The secretary of the US Treasury Janet Yellen told Congress that Thursday, January 19, 2023 the United States will reach the so-called “debt ceiling”, which is the maximum amount of money the government can borrow to finance its activities. Once the limit is reached, the Treasury will have to “start taking some extraordinary measures to prevent the United States from defaulting on its obligations,” the economist said in a letter to House and Senate leaders
According to Yellen, it is imperative that Congress takes early action to raise or suspend the debt limit. “Failure to comply with government obligations would cause irreparable damage to the US economythe livelihoods of all Americans, and global financial stability,” he stressed.
The former FED number one recalled that, in the past, even threats that the US government might not fulfill its obligations have caused real damage, including the only rating downgrade of credit in US history in 2011.
The raising or suspension of the debt limit it does not authorize new spending commitments or impose charges on taxpayers. It simply allows the US government to fund existing legal obligations that Congress and presidents of both parties have assumed in the past.
“Although the Treasury is currently unable to provide an estimate of how long the extraordinary measures will allow us to continue paying government obligations, it is liquidity and extraordinary measures are unlikely to run out before early JuneYellen said.
Usuallyas has been the case on average more than once a year for the past 50 years, the Congress strikes a deal to raise the limit.