Debt ceiling kerfuffle a 'manufactured crisis,' Treasury official says

As discussions around the debt ceiling continue in Washington and the deadline for a potential U.S. default coming as soon as next week, Wally Adeyemo, deputy secretary of the treasury, said Thursday that the "manufactured crisis" has already hurt U.S. taxpayers and could negatively impact markets.

"Ultimately, the United States has the ability to pay its bills, and it should do that in the same way that we've done it for more than 200 years," said Mr. Adeyemo at the Investment Company Institute Leadership Summit in Washington. "That has real costs that we're in this manufactured crisis. It has costs in terms of our ability to borrow. We auctioned bills right after the secretary sent her first letter (in January), it cost us $80 million more dollars to borrow for those bills and ultimately that's money out of the American peoples' pockets."

The debt limit or debt ceiling — the terms are used interchangeably — is a cap on the money the U.S. government can borrow to pay its bills. It does not authorize any new spending, but it allows the Treasury Department to finance the existing legal obligations already approved by Congress. The debt limit was last raised in December 2021 and stands at $31.4 trillion.

In a letter to congressional leaders Monday, Treasury Secretary Janet L. Yellen said its highly likely that Treasury will "no longer be able to satisfy all of the government's obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1."

On Thursday, a second ratings agency put the U.S. credit rating under review amid the risk of government officials failing to reach an agreement on its debt ceiling soon.

Republicans, led by House Speaker Kevin McCarthy, R-Calif., are pushing for spending cuts in order to raise the debt ceiling, a sticking point for President Joe Biden and congressional Democrats.

Mr. Adeyemo said Thursday that negotiators are making progress on finding a compromise, but "we shouldn't be here."

He added, "We have record-low unemployment, the economy is growing, inflation is coming down. We want to do more and do that faster. The last thing we need right now is a manufactured crisis in terms of the debt limit."

Mr. Adeyemo reiterated his optimism for reaching a deal in time, but "getting this done as soon as possible, lifting the debt limit, taking default off the table will make me even more optimistic" about the economic future of the U.S.