Finance

Treasury taking another ‘extraordinary’ step to avoid default

U.S. Treasury Secretary Janet Yellen speaks during a news conference in Nusa Dua, Bali, Indonesia on Thursday, July 14, 2022. Yellen and other top financial officials of the Group of 20 rich and industrial nations are gathering in the Indonesian island of Bali for meetings that begin Friday. (AP Photo/Firdia Lisnawati)

The Treasury Department is expanding the “extraordinary” measures that it is resorting to in order to stave off a U.S. debt default while lawmakers fight over what to do over the debt limit.

Treasury Secretary Janet Yellen said in a letter to Speaker Kevin McCarthy (R-Calif.) and other congressional leaders that she would suspend reinvestment into a large government retirement fund, after announcing similar actions last week as the U.S. reaches its debt ceiling.

The U.S. reached its technical borrowing limit of around $31.4 trillion last week, but Yellen told lawmakers that the Treasury would be able to enact accounting moves, such as the one announced Tuesday, to be able to pay the government’s bills until sometime in June. She has also said the department will cash in on some existing investments and suspend reinvestment into other retirement plans.

Yellen did not provide an updated estimate on when the department will exhaust such measures to continue to make payments on the government’s responsibilities.

Lawmakers have been unable to find much common ground on raising the debt ceiling. Republican leadership has said it wants commitments on spending cuts from the White House and Democrats for raising the debt ceiling. The possibility of spending cuts is something the White House said it will not negotiate on. Congressional Democrats have urged for a swift increase to the borrowing limit.

Last week the White House signaled that President Biden was planning to meet with McCarthy on the debt ceiling issue but said there was no set date for the sit-down. 

Experts have warned that a U.S. default on its debt would be disastrous for the economy. A new analysis from Moody’s this week predicted that a default could cost 6 million jobs and push the unemployment rate to 7 percent.

Tags Biden borrowing limit debt default Debt limit default Janet Yellen Janet Yellen Kevin McCarthy Treasury Department
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