US Treasury starts ‘extraordinary measures’ to avert debt default
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Treasury Secretary Janet Yellen says the government will effectively hit its US$31.4 trillion (S$41.46 trillion) borrowing limit on Jan 19, 2023.
PHOTO: NYTIMES
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WASHINGTON - The US Treasury began taking measures on Thursday to prevent a default on government debt, as Congress heads towards a high-stakes clash between Democrats and Republicans over raising the borrowing limit.
Such “extraordinary measures” can help reduce the amount of outstanding debt subject to the limit, currently set at US$31.4 trillion (S$41.5 trillion), but the Treasury has warned that the tools would help only for a limited time – likely not longer than six months.
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” said Treasury Secretary Janet Yellen in a letter to Congressional leadership on Thursday.
Due to the debt limit, the Treasury would be unable to fully invest a portion of the Civil Service Retirement and Disability Fund, with a “debt issuance suspension period” to last until early June.
Treasury will also halt extra investments of amounts credited to the Postal Service Retiree Health Benefits Fund, Dr Yellen said.
The world’s biggest economy could face severe disruption, with Republicans threatening to refuse the usual annual rubber stamping of an increase in the legal borrowing limit, potentially pushing the US into default.
The White House had earlier said President Joe Biden will not negotiate with Republican hardline conservatives over their “risky and dangerous” opposition to expanding the US debt limit.
“There will not be any negotiations over the debt ceiling. We will not do that. It is their constitutional duty,” press secretary Karine Jean-Pierre told reporters on Wednesday. “It should not be used as a political football.”
Far-right Republicans who now hold key power with the party’s narrow majority in the House are demanding that Mr Biden agree to slash government spending.
They argue that radical cuts are needed to reduce borrowing, which for years Congress has agreed to increase each year – raising the so-called debt ceiling.
The White House says that cuts of the size demanded by Republicans would have to come out of untouchable social security and military spending programmes, or involve major new taxes.
Democrats also argue that the current debt is to pay for a budget already agreed to by Congress and therefore not up for renegotiation. AFP
