Amid increasing partisan tensions, Treasury Secretary Janet Yellen said the department has started taking “additional extraordinary measures” to address the debt ceiling, which, if not raised or suspended, could lead to a federal government shutdown this fall.
The debt ceiling limits the total amount of money 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. It does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past, according to the Treasury Secretary.
In a letter to Speaker of the House Nancy Pelosi, Yellen said 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” would begin on Aug. 2 and last through Sept. 30.
Yellen added, “I will be unable to invest fully the Government Securities Investment Fund (G Fund) of the Thrift Savings Fund, part of the Federal Employees’ Retirement System, in interest-bearing securities of the United States, beginning today, August 2, 2021. The statute governing G Fund investments expressly authorizes the Secretary of the Treasury to suspend investment of the G Fund to avoid breaching the statutory debt limit. My predecessors have taken this suspension action in similar circumstances. By law, the G Fund will be made whole once the debt limit is increased or suspended. Federal retirees and employees will be unaffected by this action.”
“I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible,” she added.
In a letter to Pelosi the week before, Yellen said that while the current level of debt reflects the cumulative effect of all prior spending and tax decisions, which have been made by administrations and Congresses of both parties over time, failure to meet those obligations would cause irreparable harm to the U.S. economy and the livelihoods of all Americans. “Even the threat of failing to meet those obligations has caused detrimental impacts in the past, including the sole credit rating downgrade in the history of the nation in 2011,” she added.
Minority Speaker Mitch McConnell said, “I can’t imagine there will be a single Republican voting to raise the debt ceiling after what we’ve been experiencing,” according to a tweet from Jake Sherman, founder of Punchbowl News.
Sherman also tweeted, “More than 80% of Americans are worried about the rising cost of living. More than 70% are worried about slamming our economy with big tax hikes. But Democrats’ big priority is another reckless taxing & spending spree that would give Americans $3.5T more reasons to worry.”
As for Democrats, they are planning to use a budget reconciliation, which enables them to pass budget-related legislation with a simple majority vote in the Senate, for upwards of $3.5 trillion in public works and social spending, though there is no intraparty consensus over the ultimate size and scope of the package, MarketWatch reported.
“The leader’s statements on debt ceiling are shameless, cynical and totally political,” Senate Majority Leader Chuck Schumer said, according to the AP. “This debt is Trump debt, it’s COVID debt.”
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Last updated: August 4, 2021