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The Treasury Department gave this information on Friday The US debt ceiling will be reached 19 January and “extraordinary measures” needed to be taken, setting up one of the first major battles Capitol Hill after Republicans took control home.
The debt ceiling is the maximum the federal government is allowed to borrow, after Congress set a threshold more than a century ago to reduce government debt. Congress has in the past raised the debt ceiling to avoid a U.S. debt default that economists have warned would be “fiscal Armageddon.” That’s what lawmakers did after the last deadlock over the debt ceiling, which ends in 2021.
“Presidents and Treasury secretaries of both parties have made clear that the government must not default on any of the United States’ obligations, and as noted, Treasury secretaries in every administration in recent decades have used these extraordinary measures when necessary,” Treasury Secretary Janet Yellen told House Speaker Kevin on Friday. wrote in a letter to McCarthy. “Yet the use of extraordinary measures enables the government to meet its obligations only for a limited period of time.”
“That’s why it’s important that Congress act in a timely manner to raise or suspend the debt limit. Failure of the government to meet its obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability,” Yellen wrote.
However, Yellen also wrote that cash and “extraordinary measures” are unlikely to run out before early June.
The deadline comes much sooner than many experts expected. Most were predicting that the debt ceiling would last at least until the summer, when the Treasury Department would have to take extraordinary measures to avert the government’s obligations.
The debt ceiling was last raised to $31.4 trillion in December 2021.
Yellen said the immediate action means the U.S. will liquidate existing investments and suspend new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefit Fund. Reinvestments of the Federal Employees Retirement System Thrift Savings Plan into government securities investment funds will also be suspended. Those funds will be completed once the impasse is resolved.
Goldman Sachs warned last month That a close call could cause turmoil on Wall Street that would cause losses to the retirement accounts and investment portfolios of everyday Americans.
“It appears that uncertainty over the debt ceiling in 2023 could lead to substantial volatility in financial markets,” Goldman Sachs economists wrote, noting that the 2011 recession helped trigger a deep selloff in the US stock market.
Outside the market, Goldman Sachs said failure to raise the debt ceiling on time “will pose more risks to government spending and ultimately to economic growth than Treasury securities.”
Because to avoid US debt default, the federal government will transfer money to the Treasury to pay interest. That would create a huge hole that would have to be filled by delaying a host of other payments — including those millions of Americans depend on in payments such as federal employee paychecks, veterans’ benefits and Social Security.
“Failure to make timely payments will likely hit consumer confidence hard,” Goldman Sachs wrote.
The White House said on Friday it would not make concessions or discuss raising the debt ceiling.
“We won’t be discussing the debt ceiling, but broadly speaking, at the start of this new Congress, we’re reaching out to all members … making sure we have connections with those new members,” White House press secretary Karin Jean-Pierre said. .
He has said in the past “there was bipartisan cooperation on raising the debt ceiling and that’s how it should be.”
“This should not be political football,” he added. “This is not political gamesmanship, and it should be done without conditions.”
Asked why Yellen was notifying Congress just six days before the debt ceiling was reached, Jean-Pierre referred those questions to Treasury, but said that “soon Congress will do better.”
“Even the prospect of not raising the debt limit would damage the integrity and credibility of our nation,” he said. “There will be no discussion about it, it’s something that must be done.”
This is a breaking story and will be updated.
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