The Treasury Department on Friday said that it will begin “extraordinary measures” next week to prevent the U.S. government from defaulting on its payment obligations, as lawmakers in Washington prepare for a potentially devastating fiscal showdown.
As Jeff Stein and Tony Romm report, Treasury Secretary Janet L. Yellen, in a letter to congressional officials, said the administration would begin repurposing federal funds on Jan. 19 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 $31.4 trillion or the Treasury can’t borrow anymore, even to pay for spending lawmakers have already authorized.
Read more on Yellen’s announcement here.
As Jeff Stein and Tony Romm report, Treasury Secretary Janet L. Yellen, in a letter to congressional officials, said the administration would begin repurposing federal funds on Jan. 19 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 $31.4 trillion or the Treasury can’t borrow anymore, even to pay for spending lawmakers have already authorized.
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 done this during previous standoffs, and it makes the fund whole after the impasse has been resolved.“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.”
The United States 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.
Read more on Yellen’s announcement here.