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This Thursday, the United States reached the debt ceiling, forcing the Treasury Department to take a series of unusual measures so that the government is able to pay its bills and avoid defaulting.
Treasury Secretary Janet Yellen wrote a letter to House Speaker Kevin McCarthy on Thursday saying she began taking “extraordinary steps” as the administration ran into its legal debt capacity of $31.381 billion dollars.
The debt ceiling has increased about 80 times since the 1960s.
He assured that the agency will implement extraordinary measures to avoid defaulting on its debt, which would have huge consequences for the US economyglobal financial stability and many Americans.
These provisional measures will expire on June 5.
This buys Congress some time, but the duration of the extraordinary measures is subject to “considerable uncertainty,” he wrote, stressing that it is challenging to forecast how many financial obligations the federal government must pay.
“I respectfully urge Congress to act expeditiously to protect the full faith and credit of the United States”, wrote.
Why hasn’t the debt ceiling been raised?
Discussion over an increase in the debt ceiling is deadlocked among a handful of Republican congressmen who have demanded that lifting the debt limit be linked to cost reductions.
The White House responded that will not offer any concessions or negotiate to raise the debt ceiling.
For this reason, since the immediate solution is directly in the hands of those legislators, fears have increased that The US defaults on its debt for the first time in historyor come dangerously close to doing so.
How the Treasury will avoid default
The Treasury will begin to use two extraordinary measures to allow it to temporarily continue financing the operations of the federal government, which are based, mainly, on backstage accounting maneuvers.
The agency will begin to sell existing investments and suspend rollovers from the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefit Fund.
In addition, will suspend the reinvestment of a government securities fund of the Savings Plan of the Federal Employees Retirement System.
These funds are invested in special issue Treasury securities, which count against the borrowing limit.
Treasury’s actions would reduce the amount of outstanding debt subject to the limit and allow you to temporarily continue to pay government bills on time and in its entirety.
No retirees or federal employees will be affectedwith funding to be completed once the stalemate ends, Yellen wrote.
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