Without new legislation to suspend or raise debt limits, the US Treasury will not be able to issue new debt. The ministry will begin taking so-called “special measures” to prevent the United States from defaulting.

Washington, August 2 (Xinhua)-US debt restrictions officially revived on Sunday after a two-year suspension, but lawmakers still have clear plans on how to avoid potential defaults later this year. Not.

Parliament suspended debt restrictions until Saturday as part of a bipartisan budget transaction enacted in August 2019. On Sunday, debt limits were reinstated to cover all borrowings incurred during the suspension, which had risen to US $ 28.5 trillion as of the end of June.

Debt limits, commonly referred to as debt caps, are the total amount that the US government is allowed to borrow to meet existing legal obligations, such as social security and medical benefits, interest on national debt, and other payments.

Without new legislation to suspend or raise debt limits, the US Treasury will not be able to issue new debt. The ministry will begin taking so-called “special measures” to prevent the United States from defaulting.

However, the US Treasury is currently unable to predict how long anomalous measures will last due to the considerable uncertainty associated with the pandemic.

US Treasury Secretary Janet Yellen said in a recent letter to Congress leaders in mid-September that “there are scenarios where cash and special measures could run out shortly after Congress returns from the recess.” He warned that failure to meet his legal obligations would “cause”. Irreparable harm to the US economy and the lives of all Americans. “

The Congressional Budget Office also recently warned that the United States is at risk of default in October or November unless Congress raises or suspends its debt limits.

However, the Biden administration and Democrats in parliament have not decided how to deal with debt restrictions as lawmakers leave for more than a month due to the August recess.

If the Democrats want to pass a bill that raises or suspends debt caps on a regular basis, they will need the help of ten Republican senators to avoid filibuster in the Senate, analysts said.

According to the US political website The Hill, some Senate Republicans will demand significant spending cuts in exchange for support for a bill that raises debt limits.

“I’m all in favor of capping domestic discretionary spending, especially outside of defense,” said Senate Republican Whip John Thune.

However, the Democratic Party currently has no intention of curtailing transactions related to spending to gain Republican support. They accuse the Republicans of agreeing to borrow trillions of dollars during the Trump administration to enact tax cuts for the rich.

Senate Finance Committee Chairman Ron Wyden, a Democrat in Oregon, said on Twitter: “The Senate Republicans are flirting when it comes to drilling $ 2 trillion in deficits to help the rich get richer. I didn’t. “

“They are now taking our economy hostage because they don’t want to pay for their millionaire handouts,” Weiden said.

Without Republican help, Democrats could use the so-called budget adjustment process to raise debt limits. This only requires a majority of 51 votes in the Senate.

But Republicans can use the party’s vote on debt restrictions to attack the Democrats in the midterm elections next year for overspending and higher debt.

It is not clear whether the parties will have another debt limit standoff later this year or if there is a bipartisan deal to raise the debt limit.

In 2011, Standard & Poor’s downgraded the US credit rating for the first time because of the political brinkmanship of debt restrictions. A bipartisan policy center, a Washington, DC-based think tank, said another downgrade could lead to even greater market turmoil.

Meanwhile, according to the Responsible Federal Budget Committee, a nonpartisan oversight group, US defaults, or even awareness of the threat, can have serious economic consequences.

“Actual defaults will disrupt and cause turmoil in global financial markets,” the Commission said. When investors stop or reduce their investment in government bonds, interest rates rise and demand for US Treasuries falls. He said he would.

Even the default threat during standoffs will increase US borrowing costs. The Government Accountability Office estimated that the 2013 debt limit stalemate incurred additional costs of $ 38 million to over $ 70 million in a year.

“This is why neither the president nor the Treasury Secretary of either party has ever met even a proposal to default on US obligations,” Yellen said.

“I urge Congress in honor to protect the full trust and credibility of the United States by acting as soon as possible,” she added.