Yellen tells Congress that U.S. will run out of debt ceiling flexibility on Oct. 18

Treasury Secretary Janet Yellen on Tuesday told Congress that the U.S. will run out of flexibility to avoid breaching the debt limit on Oct. 18, setting a new deadline for lawmakers to avoid a catastrophic default on its payment obligations.

“It is uncertain whether we could continue to meet all the nation’s commitments after that date,” Yellen wrote in the letter to House Speaker Nancy Pelosi (D-Calif.).

Yellen’s letter came less than 24 hours after Senate Republicans blocked a bill that would suspend the debt ceiling and prevent a government shutdown on Friday. Senate Republicans have said they would support a stand-alone measure to prevent the shutdown but they largely have opposed efforts by Democrats to suspend the debt ceiling as part of a broader campaign to undermine President Biden’s economic agenda.

The U.S. government runs a large budget deficit, spending far more than it brings in through tax revenue. To address this imbalance, the government borrows money by issuing debt. But it can only issue debt up to a limit set by Congress. That limit is repeatedly raised or suspended, and lawmakers are now up against another cap.