In a letter to Congress sent Friday, U.S. Treasury Secretary Janet Yellen warned that if lawmakers do not take quick action to either suspend or increase the debt limit by Aug. 2, the Treasury will need to "start taking additional extraordinary measures in order to prevent the United States from defaulting on its obligations."

What You Need To Know

  • U.S. Treasury Secretary Janet Yellen warned that the Treasury would need to take "extraordinary measures" if lawmakers do not take quick action to either suspend or increase the debt limit by Aug. 2

  • Yellen warned that failure to address the debt limit "would cause irreparable harm to the U.S. economy and the livelihoods of all Americans"

  • A partisan fight in Congress is currently brewing about the debt ceiling, with Republicans pushing back about raising the limit as Democrats attempt to pass their $3.5 trillion spending measure through budget reconciliation

  • White House press secretary Jen Psaki said Friday that such a letter is "standard practice for Treasury Secretaries when a debt limit is going to be reimposed"

"Treasury is not able to currently provide a specific estimate of how long extraordinary measures will last," Yellen noted. "However, there are scenarios in which cash and extraordinary measures could be exhausted soon after Congress returns from recess."

The debt limit has been suspended for the past two years but will go back into effect on July 31.

Yellen said her first move on July 30 will be to suspend the sale of state and local government securities, which are used by some local jurisdictions to meet some of their financing needs but increase the level of debt held by the federal government.

"The period of time that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors, including the challenges of forecasting the payments and receipts of the U.S. government months into the future, exacerbated by the heightened uncertainty in payments and receipts related to the economic impact of the pandemic," Yellen added.

Yellen warned that failure to address the debt limit "would cause irreparable harm to the U.S. economy and the livelihoods of all Americans." She also noted that "even the threat of failing to meet those obligations" has had devastating consequences, including the 2011 downgrading of the United States' credit rating, the only time such an event occured in the history of the country.

A partisan fight in Congress is currently brewing about the debt ceiling, with Republicans pushing back about raising the limit as Democrats attempt to pass their $3.5 trillion spending measure through budget reconciliation, which would not require Republican support. The spending measure includes a number of President Joe Biden's domestic priorities, including paid family leave and free education programs.

"I’m not sure why there’s much of an incentive right now given what the Democrats are doing, trying to run roughshod over the minority in the Senate, to help them," Senate Minority Whip John Thune, R-N.D., the No. 2 Republican in the Senate, said.

"I can’t imagine there will be a single Republican voting to raise the debt ceiling after what we’ve been experiencing," the Senate's Minority Leader Mitch McConnell, R-Ky., said.

Senate Majority Leader Chuck Schumer blasted McConnell's statement on the debt ceiling as "shameless, cynical and totally political."

"This debt is Trump debt. It's COVID debt. Democrats joined three times during the Trump administration to do the responsible thing," the New York Democrat said. "And the bottom line is that Leader McConnell should not be playing political games with the full faith and credit of the United States."

President Biden, for his part, said that he hoped a partisan battle over the debt ceiling "wouldn't be the case," pegging some of the debt on the 2017 tax plan, which Senate Republicans passed using the same budget reconciliation process.

"You know, for the last four years they've just extended the debt limit," Biden told reporters Wednesday night. "The reason for the significant debt is because of their, their debt, their tax cut."

"Mitch McConnell is playing Russian Roulette with this economy," Senate Majority Whip Dick Durbin, D-Ill., said. "It is totally irresponsible, underline irresponsible."

Democrats could put a debt ceiling increase in their $3.5 trillion budet bill, but it's unclear whether they would do so. They could also tie it to a must-pass bill to fund the government, forcing Republicans to vote on both shutting down the government and defaulting.

White House press secretary Jen Psaki said that such a letter is "standard practice for Treasury Secretaries when a debt limit is going to be reimposed."

“During the previous two administrations, the Treasury Secretary sent nearly 50 letters to the Hill on the debt limit, some of which were very similar, in wording and asks and updates, to this letter," Psaki added.

Psaki noted that "we think it's clear Congress should act in a bipartisan manner to raise the debt limit as they have in the past."

The Associated Press contributed to this report.