Treasury Secretary Janet Yellen said the U.S. faces an economic "calamity" if Congress fails to raise the debt limit of $31.381T in the coming weeks.
She did not rule out President Biden bypassing lawmakers to avoid a first-ever federal default.
- The Treasury Department is expected to run out of what it calls "extraordinary measures" to operate under the current cap in early June, perhaps as soon as June 1.
- Increasing the debt limit would not authorize new federal spending; it would only allow borrowing to pay for what Congress has already approved.
- House Republicans passed a bill on April 26 to raise the debt limit but impose significant federal spending cuts.
- Yellen warned that financial and economic chaos would ensue if the borrowing limit is not increased.
- Treasury had a contingency plan in place in 2011 when the country faced a similar situation.
- The U.S. government has run a deficit averaging nearly $1T annually since 2001, meaning it spends much more than it receives in taxes and other revenue.