U.S. Treasury Secretary Janet Yellen said on Tuesday she would notify Congress that she will immediately launch extraordinary Treasury cash management measures if Congress fails to suspend or raise the debt limit by the end of July.
Yellen said the Treasury is still on track to end July with a previously estimated $450 billion cash balance, well below last Friday’s level of $718 billion.
“That’s where we expect to be on July 31,” Yellen said of the $450 billion level. “That’s consistent with the amounts that we would hold based on our expenses.
“If Congress doesn’t act, I will send a letter indicating my intention to invoke (extraordinary measures).
“I’ll provide more details about how long I think emergency powers would last. There’s a lot of uncertainty around it and I think we have to be careful,” Yellen said.
She added that she first wants to inform Congress of these estimates.
The Treasury had a cash balance of $718.1 billion as of Friday, July 9.
It forecast at its last quarterly refunding in May that it would end July with a $450 billion cash balance, down from $1.122 trillion at the end of March, when it was sending out hundreds of billions of dollars in direct COVID-19 aid payments to Americans.
The last debt limit fight started when Congress allowed a suspension to lapse on March 1, 2019, when the U.S. Treasury had a cash balance of $201.5 billion.
The Treasury was able to continue borrowing for six months until employing extraordinary cash management measures until Congress approved the current, two-year suspension on Aug. 2, 2019.
These measures allow the Treasury to conserve headroom under the debt limit to continue borrowing. They range from halting issuance of special securities to state and local governments to suspending the daily reinvestment of Treasury securities held by a government employee retirement fund and the Treasury’s Exchange Stabilization Fund.
But even though the Treasury’s current cash balance is more than three times the level in early August 2019, spending needs are uncertain, with much bigger expenses associated with COVID-19 pandemic spending.