(TargetLiberty.org) – The Biden administration is pushing its multi-trillion-dollar infrastructure plans along with other expensive packages. One new bill would provide free school lunches for all school children regardless of family income. Team Biden is also calling for expanded stimulus programs to help speed up the country’s economic recovery in the wake of the COVID-19 pandemic.
At the same time the administration pushes these expensive programs, Biden’s Treasury Secretary Janet Yellen is spending her time pleading with lawmakers to raise the country’s debt ceiling.
Yellen met with the Senate Appropriations Subcommittee members on Wednesday, June 23, to discuss US debt obligations. She talked about the growing possibility of an “unthinkable” default by the United States, a situation that could lead to a financial crisis.
Continuing, she warned lawmakers of the very real possibility of “catastrophic economic consequences” for the nation if they don’t raise the legal limit on how much money the federal government can borrow.
Taking a Closer Look at the Problem
In 2019, Congress suspended the federal government’s cap on borrowing through the end of July 2021. If lawmakers don’t grant Yellen’s request and that suspension is allowed to lapse, the Department of Treasury won’t be able to sell government securities to raise the necessary funds to cover the nation’s debt payments. Instead, it would have to resort to taking emergency measures to meet debt obligations and avoid a default.
The Treasury Department has already taken unusual measures like suspending government contributions to federal employee pension funds to provide a temporary means of making debt payments.
However, the trillions of dollars already spent the last year on multiple stimulus packages and other measures related to combating the economic fallout from the COVID-19 pandemic have depleted reserves, creating substantial concern regarding future government cash flow.
Considering the Unimaginable
Yellen warned committee members that the Treasury Department’s ability to take extraordinary measures to cover debt payments could run its course by August while Congress is on its customary summer recess.
Yellen warned legislators that if they don’t raise the debt ceiling, the resulting default “would” lead to a “financial crisis” that would threaten Americans’ jobs and savings accounts at the worst time possible — the wake of the coronavirus pandemic. Continuing, Yellen said it was “unthinkable” to consider defaulting on the federal government’s debt obligations.
With the Senate evenly divided at 50/50, raising the debt ceiling would require at least 10 Republicans vote with Democrats to reach a filibuster-proof 60 votes. However, it’s unclear whether or not the Republican caucus would agree to raise the debt cap unless Democrats agreed to adopt spending reform measures and abandon plans to fund costly programs like Biden’s proposed $6-trillion infrastructure package.
This situation could provide an edge to Republican efforts to push back on Democrats’ cash and spend ambitions. Let’s hope the GOP takes advantage of the opportunity.
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