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Yellen pushes Congress to raise debt ceiling on ‘bipartisan basis,’ as feud with GOP escalates

Treasury secretary’s comments come as Democrats decide not to resolve issue in partisan spending bill, setting up battle

Treasury Secretary Janet Yellen warned that a U.S. default would “cause irreparable harm to the U.S. economy and the livelihoods of all Americans.” (Patrick Semansky/AP)
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Treasury Secretary Janet Yellen urged Congress on Monday to raise the nation’s debt ceiling on a “bipartisan basis,” as Democrats opt not to address the issue in their partisan spending bill in an escalation of tension with the GOP.

The debt ceiling is the maximum amount of debt the Treasury Department can legally issue, even if Congress has approved a greater amount of spending. Treasury officials are able to invoke “extraordinary measures” to continue financing government activities up to a certain point, but without increasing the amount of issuable debt “would probably run out of cash” in October or November, according to the nonpartisan Congressional Budget Office. Left unaddressed, that would force the government to default on its obligations, which would trigger an economic calamity. Yellen warned that a default would “cause irreparable harm to the U.S. economy and the livelihoods of all Americans.”

Republicans threaten to hold up debt ceiling days before deadline, raising potential for political showdown

Democrats have demanded that Republicans join them in approving the higher debt ceiling, hoping to avoid the political blame for being the party solely responsible for approving a higher spending limit. But Senate Republicans have threatened not to support the debt ceiling increase unless Congress approves spending cuts or other measures, setting up a showdown that could imperil the nation’s fiscal health. Republicans repeatedly agreed to raise the debt ceiling under President Donald Trump as his administration added $7 trillion to the federal debt over the course of his term. They are now saying Democrats should take full responsibility for resolving the matter.

Yellen’s comments come as Senate Budget Committee Chairman Bernie Sanders (I-Vt.) released a budget plan that did not address the issue. The plan will pave the way for a $3.5 trillion spending package after passage of the $1.2 trillion infrastructure bill.

That means lawmakers must find another path to raising the debt limit. Funding for government agencies is set to expire Sept. 30 without further action, which could prove one avenue for including the debt ceiling limit.

Senate Republicans take step to revive debt ceiling brawls with White House

A reprisal of hostilities over the debt ceiling — a common feature of the Obama administration — could quickly dash the bipartisanship that characterized the infrastructure negotiations. Republicans have suggested that they are seeking to extract leverage and concessions from a potential standoff over the issue, and Democrats will aim to characterize that effort as a dangerous attempt to weaponize the nation’s fiscal health.

″The vast majority of the debt subject to the debt limit was accrued before the administration taking office,” Yellen told Congress in her letter on Monday. “This is a shared responsibility, and I urge Congress to come together on a bipartisan basis as it has in the past to protect the full faith and credit of the United States.”

Dean Baker, a liberal economist, said it is unclear how Democrats will try to wrap the spending bill together with the debt ceiling issue, but that they will try to pressure Senate Minority Leader Mitch McConnell (R-Ky.).

“I understand the politics of trying to force McConnell’s hand, but you hate to see this being a big issue and dominating the agenda,” Baker said. “It’s going to be hard to push anything else with this deadline on the horizon. It’s crazy we’re in this situation to begin with.”