Treasury initiates ‘extraordinary measures’ to avoid default when US reaches debt limit

The Treasury Department notified Congress Thursday that it is taking “extraordinary steps” as the federal government reached its statutory borrowing capacity of $38.381 trillion.

With no deal in sight between the White House and House Republicans to extend the nation’s borrowing authority, Treasury Secretary Janet Yellen said in a letter to Congress that the Treasury has begun to take action.

The measures include instituting a “debt issuance suspension period” starting Thursday and running through June 5. Treasury will also not honor certain investments, including the Civil Service Retirement and Disability Fund.

“As I indicated in my January 13 letter, the length of time extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting US government payments and receipts in the coming months,” wrote Ms. Yellen. “I respectfully urge Congress to act expeditiously to protect the full faith and credit of the United States.”

Mr. Biden and Speaker of the House Kevin McCarthy, Republican of California, this week deepened their respective positions on raising the debt ceiling. The president wants Congress to unconditionally raise the cap, while House Republicans want to negotiate spending cuts with the administration.

White House press secretary Karine Jean-Pierre said Wednesday that lawmakers have a “constitutional responsibility” to ensure the full faith and credit of the United States.

The stock market has fallen sharply this week even though the government may temporarily rely on accounting adjustments to stay open, and any threat to the economy would be several months away. Even many concerned analysts assume there will be a deal.

Maya MacGuineas, chair of the Committee for a Responsible Federal Budget, said the debt ceiling “is too important to make a game of chicken.”

He added: “Without qualification, the debt limit must be increased or suspended, and it must be done as quickly as possible. Ideally, we would return to the practice of raising the debt ceiling without relying on extraordinary measures, which have become too ordinary, and refrain from making the increase approach a last-minute showdown.”

She said lawmakers “who are legitimately concerned about the nation’s unsustainable debt path should take a strong stance against new lending and oppose legislation that would increase debt while offering specific solutions to rein in debt that is already in debt.” on the books, instead of threatening not to pay. invoices for loans already contracted”.

Ms MacGuineas also said: “The debt ceiling offers the opportunity for all legislators to pause, take stock of the nation’s fiscal situation and take necessary action. We are on track to start adding $2 trillion per year to debt by the end of the decade. This is an urgent problem that is not getting the attention it needs.”

He said one solution would be for Congress to lift the debt ceiling “as soon as possible and at the same time implement measures to improve our fiscal track record. This could include specific policies or processes, such as a fiscal commission.”

* This article is based in part on reports from cable services.

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