Treasury Secretary Janet Yellen warned congressional leadership Friday that the national debt limit will be reached Thursday. She said “extraordinary measures” will be used to prevent default if the limit isn’t raised.
In a letter to congressional leaders Yellen wrote, “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. Indeed, in the past, even threats that the U.S. government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”
The debt limit is the total amount of money the U.S. government is authorized by Congress to borrow to meet existing obligations.
Those obligations include Social Security and Medicare benefits, military salaries, tax refunds, interest on the national debt and other payments.
In her letter, Yellen said, “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”
Yellen said in the letter if the debt limit isn’t increased by Thursday, Treasury will implement two “extraordinary measures.”
Existing investments of the Civil Service Retirement and Disability Fund will be redeemed and new investments suspended. And reinvestment in the Government Securities Investment Fund (G Fund) of the Federal Employees Retirement System Thrift Savings Plan will be suspended.
Yellen said after the debt limit impasse has ended, those funds will be made whole.
She said Treasury could not provide an estimate of how long cash and extraordinary measures will last to meet U.S. government financial obligations, but “it is unlikely that cash and extraordinary measures will be exhausted before early June.”
House Speaker Kevin McCarthy is expected to seek large federal budget cuts before approving action to increase the debt ceiling.
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