Yellen says Treasury is taking extraordinary measures to avoid default as U.S. hits debt limit

Yellen says Treasury is taking extraordinary measures to avoid default as U.S. hits debt limit

U.S. Treasury Secretary Janet Yellen holds a news conference in the Cash Room at the U.S. Treasury Department in Washington, U.S. July 28, 2022.

Jonathan Ernst | Reuters

The Treasury Department started taking so-called extraordinary measures to keep paying the federal government’s bills as the U.S. hit its debt limit Thursday, Treasury Secretary Janet Yellen said.

In a letter addressed to House Speaker Kevin McCarthy, R-Calif., Yellen said the Treasury will suspend new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund from Thursday until June 5, 2023. But she warned both moves are subject to “considerable uncertainty” if Congress does not pass a bill to increase the $31.4 trillion debt ceiling.

The Treasury secretary told lawmakers Friday that she believes the extraordinary steps could allow the government to pay its obligations until early June. Yellen last week urged Congress to “act in a timely manner to increase or suspend the debt limit,” as failing to do so could lead to a first-ever default on U.S. debt and cause economic damage around the world.

The White House also urged Congress on Friday to raise the debt ceiling “without condition.”

The Treasury secretary warned last week that the U.S. government would hit the statutory debt ceiling on Thursday, after which extraordinary measures would be taken to keep the government from defaulting on its debt obligations.

The U.S. government has not defaulted on its debt, but the debt ceiling has been raised 22 times from 1997 to 2022, according to the Government Accountability Office. The Biden administration will prioritize negotiations for a new bill to increase the debt limit after the mid-April tax deadline, according to a senior White House official.

Concessions sought by the new Republican House majority have led to concerns that Congress could have trouble raising the debt ceiling before June. Certain GOP lawmakers have said they want to slash spending as part of an agreement to increase the borrowing limit.

Some Republican representatives have said major spending cuts to key government programs like Medicare and Social Security were part of the negotiations that helped McCarthy secure support from hardline conservatives and win the speakership.

McCarthy has called for cuts to avoid bankrupting programs like Medicare and Social Security.

“You couldn’t just keep increasing it,” he said on Fox News Sunday. “Let’s sit down and change our behavior for the good of America. Because what we’re going to do is bankrupt this country and bankrupt these entitlements if we don’t change their behavior today.”

Other House Republicans, such as Reps. Ralph Norman of South Carolina and Chip Roy of Texas, have also demanded spending decreases ahead of any debt limit increase.

“You only have so many leverage and negotiating points. The debt ceiling is one of those,” Roy said.

White House press secretary Karine Jean-Pierre told reporters this week that President Joe Biden is unwilling to tie conditions to debt ceiling negotiations.

“This is just another attempt by congressional Republicans to force unpopular cuts on programs critical to seniors, the middle class and working families. Congress needs to act and do so quickly. There is no excuse for political brinkmanship,” Jean-Pierre said Tuesday.

The debt ceiling limits the level of debt the federal government can assume. Lifting it ensures the government can continue to borrow — not spend — to meet its budgeted goals.

This is breaking news. Please check back for updates.

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