The Treasury Department said Friday the US could default on its debt as soon as June, setting up one of the first major battles on Capitol Hill after Republicans took control of the House.
The US will reach the debt limit on January 19 and then “extraordinary measures” will need to be taken, Treasury Secretary Janet Yellen wrote in a letter to House Speaker Kevin McCarthy. She said that the Treasury Department will pursue those measures, but they will only last a limited amount of time.
It is unlikely that the government will exhaust its cash and the “extraordinary measures” before early June, though she said there is “considerable uncertainty” around that forecast, Yellen wrote. She urged lawmakers to “act in a timely matter” to increase or suspend the debt limit.
“Failure to meet the government’s obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability,” she wrote.
The debt limit is the maximum that the federal government is allowed to borrow, after Congress set a level more than a century ago to curtail government borrowing.
Congress has in the past raised the debt limit to avoid a default on US debt that economists have warned would be “financial Armageddon.” That’s what lawmakers did in late 2021 following the last standoff over the debt ceiling.
The immediate measures include some accounting maneuvers involving the Civil Service Retirement and Disability Fund, the Postal Service Retiree Health Benefits Fund and the Federal Employees Retirement System Thrift Savings Plan.
However, these moves will not affect retirees’ ability to access their savings, experts said. The funds will be made whole once the impasse is settled, Yellen wrote.
Source: CNN
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