The Treasury Department says it has started taking “extraordinary measures” as the government has run up against its legal borrowing capacity of $31.381 trillion
began Thursday with Treasury implementing accounting measures as a stopgap, while frictions between President Joe Biden and House Republicans raise alarms about whether the U.S. can sidestep a potential economic crisis.said in a letter to congressional leaders it has started taking"extraordinary measures" as the government has run up against its legal borrowing capacity of $31.381 trillion.
But this particular moment seems more fraught than past brushes with the debt limit because of the broad differences between Biden and new House Speaker Kevin McCarthy, who presides overThose differences increase the risk that the government could default on its obligations for political reasons. That could rattle financial markets and plunge the world's largest economy into a wholly preventable recession.
“Why create a crisis over this?" McCarthy said this week."I mean, we’ve got a Republican House, a Democratic Senate. We’ve got the president there. I think it’s arrogance to say, ‘Oh, we’re not going to negotiate about pretty much anything’ and especially when it comes to funding.” In order to keep the government open, the Treasury Department on Thursday was making a series of accounting maneuvers that would put a hold on contributions and investment redemptions for government workers' retirement and health care funds, giving the government enough financial space to handle its day-to-day expenses until roughly June.
The underlying challenge is that the government would have to balance its books on a daily basis if it lacks the ability to issue debt. If the government cannot issue debt, it would have to impose cuts equal in size on an annual basis to 5% of the total U.S. economy. Analysts say their baseline case is that the U.S. avoids default.
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US Treasury buys time for Biden and GOP on debt limit dealThe countdown toward a possible U.S. government default began Thursday with Treasury implementing accounting measures to buy time as frictions between President Joe Biden and House Republicans raise alarms about whether the United States can sidestep a potential economic crisis. The Treasury Department said in a letter to congressional leaders it has started taking “extraordinary measures” as the government has run up against its legal borrowing capacity of $31.381 trillion. An artificially imposed cap, the debt ceiling has been increased roughly 80 times since the 1960s.
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