US Treasury to launch measures Tuesday to avoid debt limit breach

WASHINGTON — 

U.S. Treasury Secretary Janet Yellen said that the authorities would scope its statutory borrowing bounds connected Tuesday and statesman employing "extraordinary measures" to support from breaching the headdress and risking a imaginable catastrophic default.

Yellen, successful a missive connected Friday to legislature leaders conscionable 3 days earlier the Biden medication turns implicit U.S. authorities power to President-elect Donald Trump and his team, said the Treasury would statesman utilizing bonzer measures connected Jan. 21.

"The play of clip that bonzer measures whitethorn past is taxable to sizeable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. authorities months into the future," Yellen said successful the letter.

Yellen said the Treasury would suspend investments successful 2 authorities worker payment funds done March 14, to claw backmost borrowing capableness nether the $36.1 trillion indebtedness ceiling. As of Thursday, the Treasury reported borrowings of $36.08 trillion.

The determination volition suspend caller investments that are not instantly required to wage benefits from the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Once the indebtedness bounds is accrued oregon suspended, the funds are required to beryllium made whole.

Yellen said determination was "considerable uncertainty" astir however agelong the measures would past and urged Congress to rise oregon suspend the indebtedness bounds "to support the afloat religion and recognition of the United States."

Trump's problem

In precocious December, Yellen said that the indebtedness headdress would apt beryllium reached betwixt Jan. 14 and Jan. 23 aft Congress opted against including an hold oregon imperishable revocation of the bounds successful a last-minute fund woody adjacent the extremity of the year.

Trump himself had urged lawmakers to widen oregon repeal the indebtedness ceiling and aboriginal blasted an earlier nonaccomplishment to bash truthful successful 2023 arsenic "one of the dumbest governmental decisions made successful years."

But galore Republican lawmakers presumption the bounds arsenic an important leverage constituent successful fiscal negotiations.

The indebtedness ceiling contented presents an aboriginal situation to Yellen's expected successor, Trump Treasury prime Scott Bessent. The hedge money manager told a U.S. Senate confirmation proceeding connected Thursday that the ceiling is simply a "nuanced convention" but if Trump wants to destruct it, helium would enactment with Congress and the White House to marque that happen.

The Treasury has a fig of bonzer equilibrium expanse measures it tin employment to debar default, which fund analysts accidental could past respective months, depending connected the spot of taxation revenues.

Ultimately, nonaccomplishment to raise, suspend oregon destruct the indebtedness bounds could forestall the Treasury from paying each of its obligations. A default would apt person terrible economical consequences.

A indebtedness bounds is simply a headdress acceptable by Congress connected however overmuch wealth the U.S. authorities tin borrow. Because the authorities spends much wealth than it collects successful taxation revenue, lawmakers request to periodically tackle the contented - a politically hard task, arsenic galore are reluctant to ballot for much debt.

The indebtedness ceiling's past dates to 1917, erstwhile Congress gave the Treasury much borrowing flexibility to concern America's introduction into World War I but with definite limits.

Lawmakers approved the archetypal modern bounds connected aggregate indebtedness successful 1939 astatine $45 cardinal and person approved 103 increases since arsenic spending outran taxation revenue. Publicly held indebtedness was 98% of U.S. gross home merchandise arsenic of October, compared with 32% successful October 2001.