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Federal Tax

Yellen Forced to Cut Another Investment in Federal Employees Retirement Funds Due to Debt Limit

Jeff Carlson  

Jeff Carlson  

The Federal government has stopped its investment in another federal employees’ retirement fund due to its breaching the debt limit U.S. Treasury Secretary Janet Yellen informed Congressional leaders.

“As of January 23, I have also determined that, by reason of the statutory debt limit, I will be unable to invest fully the Government Securities Investment Fund (G Fund) of the Thrift Savings Fund, part of the Federal Employees’ Retirement System, in interest-bearing securities of the United States,” wrote Yellen in a letter dated January 24. She noted that her predecessors have taken this suspension action in similar circumstances.

Yellen had earlier warned leadership that the U.S. would reach its debt limit on January 19. As part of the “extraordinary” measures the Treasury can use until June 5, 2023 to stave off the U.S. defaulting on its debts, Yellen wrote at the time that she was suspending investments with respect to the Civil Service Retirement and Disability Fund, and that Treasury was also suspending investments of amounts credited to the Postal Service Retiree Health Benefits Fund. By law, all three funds will be made whole once the debt limit is increased or suspended. Federal retirees and employees will be unaffected by this action.

The debt limit places a statutory constraint on the amount of money that Treasury may borrow to fund federal operations. Federal debt is projected to reach the current debt limit, set at $31.385 trillion, in mid-2023. Brinkmanship over the debt limit began in earnest following the election of California Republican Kevin McCarthy as House Speaker. House Ways and Means Committee Chairman Jason Smith, Republican of Missouri has indicated that he wants to use debt limit talks to extract concessions from President Biden on entitlements and spending.

The White House says it wants a clean debt limit bill and that it is non-negotiable. In a January 20 press briefing, White House Press Secretary Karine Jean-Pierre reiterated the Administration’s stance. “Like the President has said many times, raising the debt ceiling is not a negotiation; it is an obligation of this country and its leaders to avoid economic chaos. Congress has always done it, and the President expects them to do their duty once again. That is not negotiable.”

Not all Democrats are on board with the President’s stance. Senator Joe Manchin, Democrat of West Virginia on January 22 said it’s a “mistake” that the Biden administration won’t negotiate with Republicans on the debt ceiling limit. “This is a democracy that we have. We have a two-party system,” Manchin said, speaking on CNN’s “State of the Union.” “And we should be able to talk and find out where our differences are. And if they are irreconcilable, then you have to move on from there and let the people make their decisions.”

As for Republicans on the issue, Representative Nancy Mace, Republican of South Carolina, said on NBC’s “Meet the Press” January 22 that Biden not negotiating with Republicans is “not how to unify our country.”

“We are very divided right now. We have $31 trillion of debt. The responsible thing to do would be to get to the table with Republicans and negotiate a way,” Mace said.

If the federal government exhausts its use of extraordinary measures for the first time, it could impact Americans who depend on government benefits and “would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,’ Yellen warned Congress in an earlier letter.

 

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