Treasury Secretary Janet Yellen formally announced to Congress last week that the agency would Start taking “extraordinary measures”. After the US reached its $31.4 trillion debt ceiling on Thursday.
But the country is not yet in debt ceiling crisis phase Tank the financial marketsSuspending Social Security payments to senior citizens, hurting the economy, and causing other disruptions.
Designed to temporarily avoid so-called extraordinary measures. As dire as they may seem, they are essentially behind-the-scenes accounting maneuvers that the Treasury Department can pull to give Congress time to raise the limit or suspend the U.S. before it defaults on its debts.
“We’re not in any immediate economic crisis right now,” said Steven Pressman, professor of economics at The New School.
But these moves don’t last indefinitely. In the past, they have given lawmakers anywhere from a few weeks to months to address the borrowing limit. How much revenue the government collects in tax revenue this spring will be a factor in how long the country can go before default.
Yellen warned lawmakers in her letter last week that it was unlikely the government would exhaust its cash and extraordinary measures before the start of June. But, he wrote, there is “considerable uncertainty” surrounding that forecast, and he urged lawmakers to “act in a timely manner.”
Treasury secretaries are authorized by Congress to take several types of extraordinary measures to prevent default. Secretaries of both Democratic and Republican administrations have taken such steps.
During this time, Yellen expects to sell existing investments and suspend reinvestments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Also, he suspends the reinvestment of government bond funds of the Federal Employees Retirement System’s Thrift Savings Program.
These funds are invested in special-issue treasury bonds that count against the credit limit. Yellen’s actions would limit the amount of outstanding debt and temporarily give the agency more capacity to continue funding the federal government’s operations.
Pensioners will not be affected and funds will be disbursed in full once the impasse ends.
“Effectively it’s money the government owes itself,” Pressman said. “The government has promised to pay back. Only the debt ceiling is stuck now.
The Treasury Department also had to take extraordinary measures Late 2021 To avoid exceeding the loan ceiling. Ultimately legislators Agreement reached December should raise the limit and avoid a default.
In August of that year, the Treasury published a list of four extraordinary measures it could take. In addition to the steps involving the three pension funds, the exchange stabilization fund may suspend daily reinvestment of Treasury securities held by the fund, the agency said.
This fund has many uses including buying or selling foreign currencies. Unlike the Pension Fund, the Treasury does not have the authority to reimburse the Transaction Stabilization Fund for lost interest after the impasse is resolved.
A fourth listed maneuvering company suspended the issuance of state and local government series treasury bonds. Although these do not count against the credit limit, suspending them removes the credit increase, which would count against the limit if granted.
The Treasury Department took extraordinary measures to manage various funds Federal debt in 2011 and 2012 According to the Government Accountability Office, Congress should be given time to raise the borrowing limit.