Absent congressional intervention the federal government will reach its limit on the amount of money it is authorized to borrow on January 19, U.S. Treasury Secretary Janet Yellen told party leaders from the House and Senate.
The current limit, which is just shy of $31.4 trillion, was set by PL 117-73 on December 16, 2021, a $2.5 trillion raise following a temporary bump of $480 billion two months prior shortly after the debit limit was reinstated in August 2021. That capped a two-year suspension due to the COVID-19 pandemic. If not raised or suspended once again, the limit will be met Thursday.
“Once the limit is reached, Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations,” Yellen wrote in a January 13 letter addressed to newly sworn in House Speaker Kevin McCarthy, Republican of California. Identical letters were sent to other high-ranking lawmakers on the Hill.
Such extraordinary measures generally allow Treasury to make emergency changes to certain government accounts. Yellen outlined two plans of attack for when the limit is reached. First, the department would redeem existing investments into the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. New investments into both funds would also be suspended. Next, Treasury would halt reinvestment of the Government Securities Investment Fund of the Federal Employees Retirement Thrift Savings Plan. All three funds “will be made whole” after the debt ceiling crisis comes to pass, Yellen said.
She implored Congress to act swiftly, explaining that using extraordinary measures is merely a short-term fix. “Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” read the letters.
Historically, times of impending debt ceiling hits invite further party-line divides. Reuters reported in November in an exclusive interview with Yellen before the midterm election results were known that some Republican lawmakers could use the opportunity to pressure President Biden into capitulating on policy matters.
However, White House Press Secretary Karine Jean-Pierre said at press briefing Friday that the Biden administration “will not be doing any negotiation over the debt ceiling.” She then clarified that “this should be done without conditions.”
“In the past, we have seen both Republicans and Democrats come together to deal with this issue,” Jean-Pierre added. “It is one of the basic items that Congress has to deal with.”
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