U.S. will begin ‘extraordinary measures’ to stay under debt limit

Comment

The Treasury Department on Friday said that it will begin “extraordinary measures” next week to prevent the United States government from defaulting on its payment obligations, as lawmakers in Washington prepare for a potentially devastating fiscal showdown.

In a letter to congressional officials, Treasury Secretary Janet L. Yellen said the administration would on Jan. 19 begin repurposing federal funds to extend the date by which the government will run out of money. Congress must pass a law raising the debt limit from its current total of $31.4 trillion or the Treasury can’t borrow any more, even to pay for spending lawmakers have already authorized.

“The use of extraordinary measures enables the government to meet its obligations for only a limited amount of time,” Yellen said in a letter to congressional leaders. “It is therefore critical that Congress act in a timely manner to increase or suspend the debt limit. Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.”

House GOP votes to slash IRS funding, targeting pursuit of tax cheats

The U.S. has never defaulted on its debt in its history, and economists warn that doing so could trigger a panic on Wall Street and lead to millions of job losses. Many leading Republican lawmakers are demanding that their new House majority use the debt limit as leverage to force the Biden administration to accept sweeping spending cuts that Democrats oppose, creating an impasse with no clear resolution at hand.

Speaking to reporters Thursday, House Speaker Kevin McCarthy (R-Calif.) said he hoped to “sit down with [Biden] early” to work through a number of outstanding fiscal issues, potentially including the looming need to raise the debt ceiling. In doing so, McCarthy reaffirmed Republicans’ interest in seeking an agreement that could cap spending in exchange for votes to address the country’s borrowing cap.

“We’ve got to change the way we’re spending money wastefully in this country,” he said.

Liberals have slammed the GOP for even considering using the debt limit to force spending cuts.

“They have the tiniest majority of one house and they are prepared to use it to get concessions they know are incredibly unpopular,” said Dean Baker, a White House ally and economist co-director of the Center for Economic and Policy Research. “It would be a terrorist attack on the economy.”

Of the extraordinary measures typically invoked by Treasury, the biggest consists of not reinvesting government funds in a retirement program for federal employees and military personnel. Treasury has repeatedly done this measure during prior standoffs, and it makes the fund whole after the impasse has been resolved.

“When the extraordinary measures are implemented, it signifies we are up against the debt limit and the clock is ticking,” said Shai Akbas, director of economic policy at the Bipartisan Policy Center, a nonpartisan think tank.

Read Nore:U.S. will begin ‘extraordinary measures’ to stay under debt limit