Treasury resorts to ‘extraordinary measures’ after US hits debt limit

19 January 2023

Treasury Secretary Janet Yellen on Thursday notified congressional leaders that her office will begin to implement “extraordinary measures” to keep the U.S. government from defaulting on its debt.

The nation’s debt climbed to more than $31.4 trillion this week, federal financial data shows, crossing the threshold set by Congress when it last raised the nation’s borrowing limit more than a year ago.

To avoid a default, Yellen previously detailed emergency measures her department would prepare in order to stave off a default. 

Those measures include temporarily redeeming existing and suspending new investments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.

Yellen also pointed to “suspending reinvestment of the Government Securities Investment Fund (G Fund) of the Federal Employees Retirement System Thrift Savings Plan” as another course of action in a letter last week.

While it’s unclear how long the Treasury Department will be able to utilize the measures to prevent a default, Yellen told leaders on Thursday that a “debt issuance suspension period” would last through June 5.

The measures buy time for Congress to hash out a bipartisan plan to address the limit, which caps how much outstanding national debt the government can hold to fulfill its financial duties.

Thursday’s letter comes as Congress remains divided on how to handle the issue, with Republicans pressing to use the debt limit as leverage to obtain spending cuts in talks with Democrats, many of whom have pressed for a clean bill to address the debt ceiling.

“With extraordinary measures now in effect, the debt ceiling is officially a ticking time bomb we can’t diffuse soon enough,” Rep. Brendan Boyle (Pa.), top Democrat on the House Budget Committee, said in a statement on Thursday, accusing Republicans of “pushing for default and start governing in Americans’ best interest.”

Republicans say fiscal reforms are critical while pointing to the growth in debt seen in recent years, particularly during the coronavirus pandemic, and the strain of high inflation. But Republicans have also pushed back on proposals by Democrats to tackle the deficit through tax measures targeting wealthier individuals and corporations.

“We don’t want to put any fiscal problems to our economy and we won’t,” Speaker Kevin McCarthy (R-Calif.) said last week. “But fiscal problems would be continuing to do business as usual.”

Experts are raising concerns about the debt limit being ensnared in another partisan spending tug-of-war, noting the potentially catastrophic consequences the economy could face if the nation were to see its first default later this year.

“If we hit the debt ceiling, and the Treasury runs out of extraordinary measures, and they really can’t meet their obligations, somebody’s not going to get paid,” David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, told The Hill in a recent interview.

“It might be someone who owns a Treasury bond. It might be a Social Security recipient,” Wessel said.

–Updated at 10:53 a.m.

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