US Treasury Secretary Janet Yellen announced on Friday that the department will initiate 'extraordinary measures' next week to avert a potential default on government debt. This action comes as the government approaches its borrowing limit, forcing the incoming Trump administration to confront the contentious issue of the debt ceiling immediately.
WASHINGTON, D.C. — The US Treasury Department will commence 'extraordinary measures' next week to avert the risk of defaulting on government debt, Secretary Janet Yellen announced on Friday, days preceding President-elect Donald Trump 's inauguration. As the government reaches its borrowing limit, the department will initiate these measures on Tuesday, the day following the inauguration, Yellen stated in a letter to congressional leaders.
This signifies that Trump's administration will be immediately confronted with the issue of the debt ceiling – the legal cap on government borrowing to cover already incurred expenses. Historically, Congress has routinely voted to raise this limit, but it has evolved into a contentious matter, with Republican budget conservatives advocating for drastic spending cuts instead. 'Extraordinary measures' serve as a mechanism for the Treasury to ensure the US government can continue paying its bills and avoid a profoundly destabilizing debt default. On Friday, Yellen remarked, 'The duration that extraordinary measures may persist is subject to considerable uncertainty.' She underscored the challenges inherent in forecasting the government's payments and revenue months into the future. 'I respectfully urge Congress to act promptly to safeguard the full faith and credit of the United States,' Yellen wrote. For the present, she stated that the Treasury would refrain from investments of the Civil Service Retirement and Disability Fund not immediately required to pay beneficiaries. It would redeem a portion of investments held by the fund and also suspend additional investments of amounts credited to the Postal Service Retiree Health Benefits Fund. These funds will be fully restored once the debt limit is raised or suspended. 'Federal retirees and employees will be unaffected by these actions,' she assured. Mid-2023 witnessed US lawmakers voting to suspend the debt limit after weeks of intense negotiations aimed at eliminating the threat of a default. The limit was reinstated on January 2nd and set at $36.1 trillion, aligning with the total outstanding debt on the preceding day. During December budget negotiations in Congress, Trump insisted on raising or even eliminating the debt ceiling altogether, though he was unsuccessful at the time. On Thursday, Trump's Treasury secretary nominee, Scott Bessent, informed lawmakers at his confirmation hearing that he would collaborate with Trump to remove the limit if the incoming president desired to do so. He also pledged that the United States would not default on its debt if he assumed the role of Treasury chief. Earlier this month, Fitch Ratings asserted that the United States faces 'significant fiscal policy challenges in 2025.' It cited the debt limit, appropriations, and 'tax cuts in the context of already large deficits and an increasing debt burden.' 'We believe it is unlikely that these will be resolved expeditiously because of long-standing weaknesses in the federal government's budgetary process and a narrow Republican House majority,' Fitch added
DEBT CEILING TREASURY DEPARTMENT JANET YELLEN DONALD TRUMP EXTRAORDINARY MEASURES US GOVERNMENT DEFAULT
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