In a letter to Congressional leadership sent Tuesday, Treasury Secretary Janet Yellen warned that the U.S. Treasury "is likely to exhaust its extraordinary measures" if Congress does not take action to suspend or raise the debt limit by Oct. 18, setting a deadline for lawmakers amid a standoff.

What You Need To Know

  • Treasury Secretary Janet Yellen warned in a letter to Congressional leaders that the U.S. Treasury "is likely to exhaust its extraordinary measures" if Congress does not take action to suspend or raise the debt limit by Oct. 18

  • The letter comes one day after Senate Republicans blocked a bill that would raise the federal borrowing limit and fund the government through December, as well as provide billions in funding for recent natural disaster relief and aid for Afghan refugees

  • Republicans have refused to address the debt limit, despite bipartisan support to raise the limit multiple times under former President Donald Trump, forcing Democrats to go it alone

  • "The full faith and credit of the United States should not be put at risk," Yellen said

"We now estimate that Treasury is likely to exhaust its extraordinary measures if Congress has not acted to raise or suspend the debt limit by October 18," Yellen wrote. "At that point, we expect Treasury would be left with very limited resources that would be depleted quickly."

"It is uncertain whether we could continue to meet all the nation’s commitments after that date," the Treasury Secretary warned. "While this is our best estimate, the federal government's cash flows are subject to unavoidable variability."

The letter comes one day after Senate Republicans blocked a bill that would raise the federal borrowing limit and fund the government through December, as well as provide billions in funding for recent natural disaster relief and aid for Afghan refugees. Republicans have refused to address the debt limit, despite bipartisan support to raise the limit multiple times under former President Donald Trump, forcing Democrats to go it alone.

The United States has never defaulted on its debts. Yellen, who has repeatedly warned that defaulting could cause considerable damage to the U.S. economy and financial markets worldwide, wrote in her letter that not acting quickly could have devastating consequences.

“We know from previous debt limit impasses that waiting until the last minute can cause serous harm to business and consumer confidence, raise borrowing costs for taxpayers, and negatively impact the credit rating of the United States for years to come,” she wrote. “Failure to act promptly could also result in substantial disruptions to financial markets, as heightened uncertainty can exacerbate volatility and erode investor confidence.”

"The full faith and credit of the United States should not be put at risk," Yellen said.

Here's a look at what experts predict the fallout would be if the U.S. doesn't take action to address the debt limit.