Limits

In this buzz: U.S. debt limit or how to avoid default ; Treasury Secretary Janey Yellen; McCarthy and more …

U.S. Debt Limit:
Everything has its limits, and the U.S. will hit its debt limit on Thursday and begin to take steps to avoid default. Treasury Secretary Janey Yellen notified Congress of this and asked House Speaker McCarthy to either suspend or increase the debt limit.

Yellen wrote that the Treasury department will begin taking “certain extraordinary measures” to prevent the U.S from defaulting on its obligations. Yellen acknowledged that it is unlikely that cash and extraordinary measures will be “exhausted before June.” Failure to meet the government’s debt obligations would likely cause, “irreparable harm to the U.S. economy, the livelihood of all Americans, and global financial stability”, Yell wrote.

Secretary Yellen Sends Debt Limit Letter to Congress (1/13/2023)

What’s different now?
She’s not wrong. The U.S. has been here before so what makes this time (potentially) different?

• Extreme MAGA Republicans could force a default unless a debt limit increase is tied to concessions such as less government spending.
• Such a default would impact not only U.S. Treasury yield but could plunge the country into recession and cause interest rates on everything from mortgages to auto loans to skyrocket.

Ok, but:
McCarthy hasn’t been shy about telling anyone who will listen that Republicans intend to demand “massive” spending cuts to the federal budget in exchange for raising the debt limit but that GOP lawmakers don’t want to cause fiscal problems for the economy. Time will tell.