Yellen Presses Congress to Raise U.S. Debt Limit as Capacity Nears

The move would not increase government spending or approve future spending, she said in a statement, adding: “It simply allows Treasury to pay for previously enacted expenditures. Failure to meet those obligations would cause irreparable harm to the U.S. economy and the livelihoods of all Americans.”

The United States is projected to exhaust its borrowing authority in October and failure to approve an increase in the statutory debt limit – now at $28.5 trillion- could trigger another federal government shutdown or a debt default.

Yellen, who earlier urged action in a July 23 letter to U.S. lawmakers, noted that the majority of the debt accrued prior to the Biden administration and said Congress should act “as it has in the past to protect the full faith and credit of the United States,” calling it “a shared responsibility.”

But Senate Republican Leader Mitch McConnell last week said Democrats, who narrowly control the chamber, should act on their own to address the issue.

Meanwhile, the Treasury Department has already announced measures such as suspending investments in employee health benefits funds to preserve the government’s borrowing authority.

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(Reporting by Susan HeaveyEditing by Chizu Nomiyama)