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The Treasury Department announced that it will begin taking emergency cash conservation measures starting today to avoid exceeding the limit of federal debt after a two-year suspension of the debt ceiling expires at the end of July.
According to CNBC, experts said that the measures will allow the Treasury to pay government debts without new debt for two to three months . After that, Congress will have to increase or suspend the debt limit or risk the United States defaulting on its obligations.
The limit, A facet of American policy for more than a century, it prevents the Treasury from issuing new bonds to finance government activities once a certain level of debt is reached. That level reached $ 22 trillion dollars in August 2019 and was suspended until last Saturday.
The new debt limit will include additional loans from Washington since the summer of 2019. The Congressional Budget Office estimated in July that the new cap will likely hit just $ 28. $ 5 trillion.
Although the federal government has never defaulted, CNBC exposed that experts say such an event would have disastrous effects on the United States economy by triggering the interest rates.
Harvard University economics professor Karen Dynan said that “The government needs to have funds, for example, to paying interest on its debt, and if it stopped paying interest, that could be unsettling for the financial markets ”.
The extraordinary measures allow the Treasury to bail out certain investments in federal pension programs and stop new ones to generate cash without increasing total debt. But when those methods are exhausted, there is no backing.
Unless the government floats new Treasuries, Social Security payments , Medicare, military spending, interest on US debt and other obligations just cease.
As this happens at the Federal Reserve, in Congress Nancy Pelosi must not only accumulate enough votes to pass a suspension of the debt ceiling or an increase, but also must protect its small majority.
An aide to the Democratic leadership of the House of Representatives told CNBC that discussions on the roof are ongoing and that the party’s top lawmakers will not risk America’s full faith and credit.
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