US starts extraordinary measures to avert debt default

Published January 19th, 2023 - 04:46 GMT
U.S. debt crisis
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ALBAWABA — The United States Treasury started extraordinary measures on Thursday to prevent the government defaulting on its debt, as Democrats and Republicans clash over raising the borrowing limit.

Treasury Secretary Janet Yellen had announced in a letter to Congress last week that the U.S. would reach the debt limit on Jan. 19 and that her agency would have to use two extraordinary measures for the initial phase of this debt standoff — stop investing for the Government Securities Investment Fund and delaying certain federal pension investments — at its disposal to continue to make payments on the debt and avoid defaulting.

Yellen’s maneuverers can help reduce the amount of outstanding debt subject to the limit, currently set at $31.4 trillion, but the Treasury warned that the tools would only help for some time. 

"It is unlikely that cash and extraordinary measures will be exhausted before early June," Yellen said, but also stated that there was “considerable uncertainty” about how much room the measures will provide.

"I respectfully urge Congress to act promptly to protect the full faith and credit of the United States," said Yellen in a letter to Congressional leadership on Thursday.

With the federal government now on borrowed time to act on the debt, lawmakers will have to work with U.S. President Biden’s administration to raise or suspend the debt limit to avoid a default that could potentially destabilize global markets and devastate not only the U.S. economy, but also drag many other economies into deep recessions.

Brian Deese, director of the National Economic Council, issued numerous calls to Congress on Thursday to raise the debt limit in order to fulfill U.S. obligations and warned of the potential for "economic chaos" if Congress did not do so. 

“This is about economic stability versus economic chaos,” Deese told Kaitlan Collins on “CNN This Morning,” calling it Congress’ “basic, fundamental obligation”. 

“Even just the specter that the United States might not honor its obligations does damage to the economy,” Deese added.

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