WASHINGTON:
US Treasury Secretary Janet Yellen said the government will reach its legal borrowing limit on Tuesday and begin implementing “emergency measures” to avoid exceeding the ceiling and risking a potentially catastrophic default.
Yellen, in a letter Friday to congressional leaders, just three days before the Biden administration hands over control of the US government to President-elect Donald Trump and his team, said the Treasury Department would begin using emergency measures on the 21 January.
“The length of time the emergency measures may last is subject to significant uncertainty, including the challenges of forecasting US government payments and receipts months into the future,” Yellen said in the letter. Yellen said the Treasury Department would suspend investments in two government employee benefit funds until March 14 to restore borrowing capacity below the $36.1 trillion debt ceiling. As of Thursday, the Treasury Department reported $36.08 trillion in loans.
The move would suspend new investments not immediately required to pay benefits from the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefit Fund. Once the debt limit is raised or suspended, the funds must be completed.
Yellen said there was “significant uncertainty” about how long the measures would last and called on Congress to raise or suspend the debt limit “to protect the full faith and credit of the United States.”
Trump’s problem
In late December, Yellen had said the debt ceiling would likely be reached between January 14 and 23 after Congress opted not to include an extension or permanent repeal of the limit in a last-minute budget deal near the end of the year .
Trump himself had urged lawmakers to extend or repeal the debt ceiling and later denounced an earlier failure to do so in 2023 as “one of the dumbest policy decisions made in years.” But many Republican lawmakers see the cap as an important leverage point in budget negotiations.
The debt ceiling issue is an early challenge for Yellen’s expected successor, Scott Bessent, Trump’s Treasury pick. The hedge fund manager told a US Senate confirmation hearing on Thursday that the cap is a “nuance” but that if Trump wants to remove it, he will work with Congress and the White House to make it happen. The Treasury Department has a number of emergency balance sheet measures it can use to avoid a default, which budget analysts say could last several months, depending on the strength of tax revenues.
Ultimately, failure to raise, suspend, or eliminate the debt limit could prevent the Treasury from paying all of its obligations. A US default would likely have serious financial consequences.
a href=”https://tribune.com.pk/story/2522993/us-to-take-extraordinary-measures-to-avoid-default”>Source link
