To avoid hitting the federal government’s debt ceiling, Department of Treasury Secretary Janet Yellen notified Congress in a letter Friday that the department would take its statutory extraordinary measures and suspend investments in some federal retirement programs.
“I am writing to inform you that beginning on Thursday, January 19, 2023, the outstanding debt of the United States is projected to reach the statutory limit,” Yellen wrote. “Once the limit is reached, Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations.”
The current debt ceiling is more than $31 trillion.
Yellen said the two extraordinary measures Treasury anticipates implementing this month are:
(1) redeeming existing, and suspending new, investments of the Civil Service Retirement and Disability Fund (CSRDF) and the Postal Service Retiree Health Benefits Fund (Postal Fund), and
(2) suspending reinvestment of the Government Securities Investment Fund (G Fund) of the Federal Employees Retirement System Thrift Savings Plan.
“Congress has expressly provided Treasury with authority to take these actions, and prior Treasury Secretaries have used these measures, which will reduce the amount of outstanding debt subject to the limit and temporarily provide additional capacity for Treasury to continue financing the operations of the federal government,” wrote Yellen.
“After the debt limit impasse has ended, the CSRDF, Postal Fund, and G Fund will be made whole,” said Yellen.
What is the debt limit?
The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.
The debt limit does not authorize new spending commitments. It only allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.
The debt ceiling negotiation will likely be a political showdown as it has been in years past. House Speaker Kevin McCarthy (R-CA) has endorsed a proposal by members in his party that are demanding spending cuts as part of any extension of the federal government’s borrowing authority. However those conditions for raising the debt limit are unlikely to be accepted by the Democratic-controlled Senate or the president.
According to the Treasury Department, Congress has always acted to raise the debt limit. Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents. Congressional leaders in both parties have recognized that this is necessary.
“The period of time that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors, including the challenges of forecasting the payments and receipts of the U.S. government months into the future,” Yellen wrote. “While Treasury is not currently able to provide an estimate of how long extraordinary measures will enable us to continue to pay the government’s obligations, it is unlikely that cash and extraordinary measures will be exhausted before early June.”
To read the full letter from Treasury Secretary Janet Yellen, go here.