The Treasury Department tells Congress that the United States debt ceiling will be reached within days. This creates the potential for a confrontation when Congress decides how to raise the debt ceiling.
Treasury Secretary Janet Yellen announced on Friday that the United States will reach its debt ceiling on Thursday, January 19.
US Debt Ceiling
Many Republicans contend that continually raising the ceiling is neither fiscally prudent nor sustainable. Kevin McCarthy, the speaker of the House, thinks that the nation needs a better spending plan.
The Republicans’ control of the House provides them greater negotiating leverage. They state that they will only consent to a debt increase if it is coupled with a spending reduction.
Congressman Chip Roy pledged that he will not back down until the United States is on a fiscally prudent course.
Democrats are concerned that this will result in cuts to Social Security and Medicare. Congressman Richard Neal suggested beginning negotiations.
This is what so-called extreme measures are intended to prevent temporarily. Even though they may seem dire, they are primarily behind-the-scenes accounting maneuvers that the Treasury Department can employ to buy Congress time to raise or suspend the debt ceiling before the United States defaults on its debts.
Last week, Yellen told lawmakers in a letter that it is unlikely the government will exhaust its cash reserves and extraordinary measures before early June. She stated that there is much ambiguity surrounding this forecast, and she encouraged Congress to act promptly.
Congress Takes Extraordinary Measures
Congress has enabled Treasury secretaries to use a variety of exceptional actions to prevent a default. Such actions have been taken by secretaries in both Democratic and Republican administrations.
Yellen anticipates liquidating existing investments and delaying reinvestment of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund this time around. In addition, she is stopping the reinvestment of a Federal Employees Retirement System Thrift Savings Plan government securities fund.
This money is invested in Treasury special-issue securities, which contribute to the debt limit. Yellen’s measures will temporarily increase the agency’s capacity to continue financing the federal government’s operations by reducing the amount of outstanding debt subject to the limit.
No pensioners will be affected, and the funds will be restored to their original state once the standoff is resolved.