Debt ceiling: The Treasury Department has warned it will take “extraordinary measures” over the debt limit. That’s what that means


Treasury Secretary Janet Yellen formally told Congress last week that the agency would have to start taking “extraordinary measures” After the United States reached its debt limit of $31.4 trillion on Thursday.

But the nation has not yet reached the point where the debt ceiling crisis could be Stock market tanksand suspending Social Security payments for seniors, hurting the economy and creating other chaos.

This is the so-called exceptional measures designed to avoid it temporarily. And while they may sound dire, they are essentially behind-the-scenes accounting maneuvers that the Treasury Department can take to give Congress time to increase or suspend the limit before the United States is forced to default on its debt.

“We’re not in any economic crisis right now,” said Stephen Pressman, professor of economics at The New School.

But these moves don’t last indefinitely. In the past, they have given lawmakers between a few weeks and several months to address the borrowing cap. How much revenue the government collects in tax revenue this spring will be a factor in how long a state can go before defaulting.

Yellen warned lawmakers in her letter last week that the government is unlikely to run out of money and the extraordinary measures before early June. But, she wrote, there is “a great deal of uncertainty” around those projections, and she urged lawmakers to “act in a timely manner.”

Treasury secretaries are authorized by Congress to take several types of extraordinary measures to prevent defaults. Secretaries in both Democratic and Republican administrations have taken such steps.

This time, Yellen expects to sell existing investments and suspend reinvestment in the Civil Service Pension and Disability Fund and the Postal Service Retirees Health Benefit Fund. It is also suspending reinvestment of the savings plan’s government securities fund into the federal employee retirement system.

This money is invested in special-issue Treasury notes, which count against the debt limit. Yellen’s actions would reduce the amount of outstanding debt subject to the cap and temporarily provide the agency with additional capacity to continue funding federal government operations.

None of the retirees will be affected, and the funds will be complete once the deadlock is over.

“Effectively, that’s money that the government owes itself,” Pressman said. The government promised they would pay it. The only reason it’s in trouble now is because of the debt ceiling.”

The Treasury Department also had to take extraordinary measures last half of 2021 To avoid breaching the debt ceiling. Ultimate legislators He reached an agreement in December to raise the limit and avoid default.

In August of that year, the Treasury released a list of four extraordinary actions it could take. In addition to the steps related to the three pension funds, the agency said it may suspend the daily reinvestment of Treasury securities held by the stock exchange stabilization fund.

The fund has a number of uses, one of which is buying or selling foreign currencies. Unlike pension funds, the Treasury does not have the authority to reimburse the exchange stabilization fund for lost interest after the impasse is resolved.

The fourth maneuver listed involved suspending the agency’s issuance of government and local government treasury bonds. While these do not count against the debt limit, suspending them cancels increases in debt that would count against the limit if it were issued.

The Treasury Department has also taken extraordinary measures involving various funds to manage Federal debt in 2011 and 2012 To give Congress time to raise the borrowing cap, according to the Government Accountability Office.

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