Treasury Secretary Yellen Announces Extraordinary Measures to Avoid Debt Limit Breach
WASHINGTON - U.S. Treasury Secretary Janet Yellen has announced that the government will reach its statutory borrowing limit on Tuesday and will implement "extraordinary measures" to prevent a catastrophic default.
In a letter to congressional leaders on Friday, Yellen stated that the Treasury will begin using these measures on January 21. The uncertainty surrounding the duration of these measures is significant due to the complexity of forecasting government payments and receipts in the coming months.
The Treasury will temporarily suspend investments in the civil service retirement and disability fund that are not immediately required for benefit payments. Yellen previously estimated the debt cap would be reached between January 14 and 23, following Congress's failure to extend or repeal the limit in the year-end budget deal.
Under the 2023 budget agreement, the debt ceiling was suspended until January 1, 2025. While the Treasury can continue paying its bills for several more months, Congress must address the issue next year.
Failure to act could result in the Treasury's inability to pay its obligations, potentially leading to severe economic consequences. The debt limit, set by Congress, restricts the amount the government can borrow to fund its operations. Due to the government's reliance on borrowing to cover the deficit between spending and revenue, lawmakers must periodically increase the limit.
The history of the debt ceiling dates back to 1917, when Congress provided the Treasury with more borrowing flexibility for World War I. The first modern debt limit was set in 1939 at $45 billion, and has been raised 103 times since then as spending exceeded revenue.
As of October, public debt held by the public accounted for 98% of U.S. gross domestic product, compared to 32% in 2001.