[1/3] US Treasury Secretary Janet Yellen speaks during her interview with Reuters in New Delhi, India, November 11, 2022. REUTERS/Altaf Hussain
WASHINGTON, Jan 13 (Reuters) – U.S. Treasury Secretary Janet Yellen said Friday that the United States will likely reach its $31.4 trillion mandatory debt limit by Jan. 19, forcing the Treasury Department to roll out extraordinary cash management measures that could likely prevent default until early June.
“Once the cap is reached, the Treasury Department will need to begin taking certain extraordinary steps to prevent the United States from failing to meet its obligations,” Yellen said in a letter to new Republican House of Representatives Speaker Kevin McCarthy and other congressional leaders.
He urged lawmakers to act quickly to raise the debt ceiling to “protect the full confidence and credit” of the United States.
“While the Department of Finance is currently unable to provide an estimate for how long extraordinary measures will allow us to continue paying government obligations, it is unlikely that cash and extraordinary measures will run out before early June,” the letter said.
Republicans who now control the House have threatened to use the debt ceiling as leverage to demand spending cuts from Democrats and the Biden administration. This has raised fears in Washington and on Wall Street about a bitter fight over a debt ceiling this year that could be at least as disruptive as the protracted battle of 2011, which prompted a brief downgrade of the US credit rating and years of domestic and domestic coercion. cuts in military spending.
The White House said Friday after Yellen’s letter that it would not negotiate to raise the debt ceiling.
“This must be done unconditionally,” White House spokeswoman Karine Jean-Pierre told reporters. “There will be no negotiations for that.”
House Republicans plan to move a “debt priority” measure in late March that would require the US Treasury to continue making certain payments after reaching the debt ceiling, but details have not been finalized, said a person familiar with the plans. Reuters. The proposal was first reported by the Washington Post.
The Republicans’ plan would require the Treasury Department to continue making interest payments on the debt, the Post reported, citing sources. It could also stipulate that the Treasury must continue to make Social Security, Medicare and veterans’ benefit payments, and fund the military, the paper said.
The plan was part of a private deal reached this month to resolve an impasse between the hard-line right in the House and McCarthy over his election as speaker, the Post said.
Yellen’s estimate expresses confidence that the government can pay its bills only through early June without raising the cap marking a much earlier deadline than estimates by some outside budget analysts that the government will exhaust its cash and borrowing capacity – the so-called “Date X” – around the third calendar quarter. 2023.
Analysts have noted that some Treasury bills maturing in the second half of the year generate a premium in their yields which may be associated with an increased risk of default in that window.
“You can read this partly as trying to get Congress to act sooner rather than later,” said the Bipartisan Policy Center’s economic director Shai Akabas, adding that the Treasury Department was conservative in its approach.
Yellen said that there was “considerable uncertainty” over how extraordinary measures would prevent defaults, due to a variety of factors, including challenges to forecasting government payments and revenues over the next few months.
PENSION INVESTMENTS SUSPENDED
On Wednesday, Treasury Department data showed that the US federal debt was $78 billion under the limit, with the Treasury’s operating cash balance of $346. To see also : Supreme Court: Principle originalism or party politics?.4 billion. The department on Thursday reported an $85 billion December deficit as revenue eased and spending grew, especially on debt interest costs.
Yellen said in her letter that the Treasury Department this month anticipates suspending new investments in two government pension funds for retirement and health care, as well as suspending reinvestment in the Government Securities Investment Fund, or G Fund, part of the savings plan for federal employees. Pension investments are restored once the debt ceiling is raised.
“The use of extraordinary measures allows the government to fulfill its obligations for only a limited time,” Yellen wrote to McCarthy and other congressional leaders.
“It is therefore imperative that Congress act in a timely manner to increase or suspend the debt limit. Failure to meet government obligations will cause irreparable damage to the US economy, the livelihoods of all Americans, and global financial stability,” Yellen wrote.
Reported by Kanishka Singh and David Lawder; Additional reporting by David Morgan, Richard Cowan and Ismail Shakil; Written by David Lawder and Tim Ahmann; Edited by Diane Craft, Andrea Ricci and Grant McCool
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