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| The main building on the side of the House of Representatives of the United States Congress |
WASHINGTON — U.S. Treasury Secretary Janet Yellen told lawmakers on Thursday (Jan. 19) that the U.S. has begun to take “extraordinary measures” to avoid violating the $31.4 trillion debt ceiling; the move has sparked debate in Washington about how to avoid defaults on government fiscal obligations and global economic catastrophe.
Treasury Secretary Janet Yellen said she had begun suspending investments in the government civil servants’ retirement fund and the Postal Employee Retiree Health Plan. The plans do not require immediate payment to beneficiaries, but she warned that the measures are only expedient until June 5.
Yellen told key leaders in Congress they needed to raise the administration’s debt ceiling or, perhaps, in the unlikely event that spending limits were lifted. Lifting spending restrictions is the practice in most countries around the world. The United States has raised its debt ceiling 78 times since 1960.
The U.S. government often fails to balance its annual budget, often spending $1 trillion or more than its tax revenues before reaching the debt ceiling set by Congress and agreed upon by the then-president.
The United States has never violated its global financial commitments, such as with China, Japan, and other countries that buy U.S. bonds; It has also never defaulted on certain taxpayer programs, such as pension and health care payments to older Americans.
But political debates in the United States about raising the debt ceiling to cover spending that Congress and successive presidents have already approved are often intertwined with heated discussions about future spending, leading to a stalemate when spending approaches the debt ceiling.
There was such a stalemate in 2011. Then-Democratic President Barack Obama eventually reached a deal with Republican opposition in Congress to raise the debt ceiling while limiting government spending for much of the past decade.
Now, House Republicans, who just gained a slim majority, are also calling for future spending cuts; to maintain government agency discretionary federal spending in 2024 at 2022 levels.
House Speaker Kevin McCarthy told reporters this week, “I don’t understand why the past behavior should continue.”
But the White House appears to be looking backward, instead demanding a “pure vote” on raising the federal debt ceiling, which has nothing to do with total new spending. President Joe Biden has said he will not limit pension and health care assistance to older Americans.
White House spokeswoman Olivia Dalton told reporters on Air Force One while accompanying Biden to California to see storm damage in the state: “Americans have every right to expect that Congress will come together in a bipartisan fashion, as they have done before, to ensure that we put the American economy on this stable path.” The
White House has not engaged in any negotiations with congressional leaders
If the government defaults and has essentially no money to repay its debt, payments to U.S. bondholders, foreign governments, and U.S. individuals will be delayed until the new debt ceiling is reached. Salaries for government workers and monthly payments for pensioners, as well as health care providers, will also be delayed.
In addition, the credit rating in the United States could be downgraded, and the stock market could be as volatile as it was in 2011.
Yellen warned that Congress needs to act to avert such financial turmoil
Yellen told congressional leaders that “the length of time the extraordinary measures are likely to last is subject to considerable uncertainty, including the challenge of predicting payments and collections from the U.S. government in the coming months.” I respectfully urge Congress to act swiftly to fully protect America’s confidence and credibility.