Treasury Secretary Tells Congress To Raise Debt Ceiling Or Face 'Extraordinary Measures'

Treasury Secretary Janet Yellen on Friday warned Congress that if U.S. lawmakers are unable to raise or extend the debt ceiling by Aug. 2, her department will have to take “extraordinary measures.”

In her letter to House Speaker Nancy Pelosi, Yellen urged leaders to raise the federal debt limit as soon as possible or risk “irreparable harm to the U.S. economy and the livelihoods of all Americans.”

The debt ceiling does not directly impact government spending but it sets a limit to how much debt the government can take on.

The Treasury often takes what it calls “extraordinary measures” to avoid breaching the debt limit. The United States so far has never defaulted on its debt.

However, recent history shows that getting uncomfortably close to it can create chaos. In 2011, House Republicans’ refusal to pass a debt ceiling increase led to a downgrade of the U.S. sovereign credit rating that upset financial markets, CNBC reported.

“Even the threat of failing to meet those obligations has caused detrimental impacts in the past, including the sole credit rating downgrade in the history of the nation in 2011,” Yellen wrote to Pelosi. “This is why no President or Treasury Secretary of either party has ever countenanced even the suggestion of a default on any obligation of the United States.”

A default on the national debt could upend trillions of dollars in U.S. global commerce and financial holdings, triggering a financial crisis.

“We certainly expect Congress to act in a bipartisan manner as they did three times under the prior administration to raise the debt limit,” Jen Psaki, White House press secretary, said on Friday.