US starts 'extraordinary measures' to ward off potential debt default

By Al Mayadeen English
Source: Agency
19 Jan 2023 20:51
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The fight over the debt ceiling has become an annual tradition in Congress between the ruling party and the opposition.

The United States Department of the Treasury Washington, D.C., US, August 30, 2020 (Reuters/Andrew Kelly)

According to US Treasury Secretary Janet L. Yellen, "extraordinary measures" will be taken to prevent defaulting on debt. She announced that the treasury would temporarily suspend payments that aren't urgent and divert the money for more pressing needs i.e. services needed to keep the government operating.

“First, I have determined that, by reason of the statutory debt limit, I will be unable to fully invest the portion of the Civil Service Retirement and Disability Fund (CSRDF) not immediately required to pay beneficiaries, and that a 'debt issuance suspension period' will begin on Thursday, January 19, 2023, and last through Monday, June 5, 2023,” Yellen said in a letter to House Speaker Kevin McCarthy.

Yellen had warned McCarthy in an earlier letter sent last week that the debt is anticipated to exceed its statutory limit. The fight over the debt ceiling has become an annual tradition in Congress between the ruling party (presently the Democratic Party with Yellen being one of its office bearers) and the opposition (presently the Republicans most prominent among which is McCarthy).

Back in 2011, a protracted congressional struggle on raising the debt ceiling triggered a financial crisis that resulted in the US losing its top triple-A credit status from a major credit rating agency: Standard & Poors.

In October 2021, Biden declared that "the reason we have to raise the debt limit is in part because of the reckless tax and spending policies under the previous Trump administration." He noted that "Republicans in Congress raised the debt three times when Donald Trump was president and each time with Democrat support."

In February 2022, US national debt hit a record high of over $30 trillion. Debt had increased by around $7 trillion over the span of the pandemic. As a result of the trillions spent containing the virus, financial experts assessed that the new maximum would be reached many years sooner than what the country's government had projected.