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Janet Yellen warns Congress that failing to act on the debt limit risks ‘irreparable’ economic harm.

Treasury Secretary Janet L. Yellen at the White House in May.Credit…Erin Scott for The New York Times

July 23, 2021, 1:52 p.m. ET

Treasury Secretary Janet L. Yellen warned Congress on Friday that the United States economy faces “irreparable harm” if lawmakers fail to raise or suspend the nation’s borrowing cap and that the Treasury Department would begin taking “extraordinary measures” to avoid breaching the so-called debt limit.

In a letter to Congress, Ms. Yellen said that the nation’s debt will hit its statutory limit on Aug. 1 and that it is possible that soon after lawmakers return from their August recess the United States could face the dire prospect of defaulting on its obligations. Urging Congress to act, she recalled that in 2011 the threat of default caused nation’s credit rating to be downgraded.

“Even the threat of failing to meet those obligations has caused detrimental impacts in the past, including the sole credit rating downgrade in the history of the nation in 2011,” Ms. Yellen wrote. “This is why no President or Treasury Secretary of either party has ever countenanced even the suggestion of a default on any obligation of the United States.”

Ms. Yellen also warned that the pandemic had made it difficult for Treasury to predict how long it can delay breaching the debt ceiling given uncertainty around the timing of government payments and tax receipts.

The Treasury often takes what it calls “extraordinary measures” to avoid breaching the debt limit, which is a cap on how much the government can borrow. Those measures include suspending investments of the Exchange Stabilization Fund and suspending the issuance of new securities for the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.

The C.B.O. estimated this week that the Treasury Department could run out of cash by October or November.

Ms. Yellen noted that the government is required to make a large payment of $150 billion for a Department of Defense-related retirement and health care investment on Oct. 1, which will deplete its cash reserves.

Brinkmanship over the debt limit has become common in Washington. Republicans have traditionally resisted raising or suspending the debt limit when Democrats control the White House. They backed a two-year suspension of the debt limit in 2019 as part of a spending agreement with Democrats while former President Donald J. Trump was in office.

Senator Mitch McConnell, the minority leader, suggested this week that Republican senators would not back a debt ceiling increase and that Democrats would have to deal with it on their own.

White House officials said that they remain hopeful that lawmakers will work together to avert a debt limit crisis.

“We certainly expect Congress to act in a bipartisan manner as they did three times under the prior administration to raise the debt limit,” Jen Psaki, White House press secretary, said on Friday.

Ms. Yellen said in her letter that suspending or increasing the debt limit does not authorize future spending but, in fact, allows the Treasury Department to pay for expenses that were previously approved by Congress.

“The current level of debt reflects the cumulative effect of all prior spending and tax decisions, which have been made by Administrations and Congresses of both parties over time,” Ms. Yellen wrote.