US debt ceiling reached critical; ‘exceptional mechanisms’ to pay debts are now in place.
After the U.S. government’s lending quota was reached on Thursday, the Treasury had to take “exceptional steps” to continue paying the government’s debts.
House Speaker Kevin McCarthy got a letter from Treasury Secretary Janet Yellen on Thursday indicating that a “issuing debt securities pause phase” will start on Jan 19 and extend until Jun 5.
As portion of it, the government would stop producing new contributions in the Civil Service Retirement and Disability Fund also halt investing that money in a fund supporting retiree postal workers’ medical benefits. These actions will have no effect on current or former federal workers or pensioners.
Yellen stated that all the money will be restored once the debt ceiling was raised.
Yellen underlined that although she expects the steps adopted to avert a collapse should last until June, there is still a chance that they won’t.
Many Republicans have pledged to resist any moves to increase debt limits in the months ahead unless significant expenditure cuts are made, whereas Democrats had sworn not to engage in any negotiations upon that subject.
In the case of default, systems including Social Security benefits, tax refunds, and base pay would indeed be affected. A foreclosure might cause the economy to enter a recession, according to analysts.
Republicans are apparently drafting a proposal that, in the eventuality that legislators fail to come to an agreement and emergency procedures expire, should instruct Treasuries to choose which payments to concentrate.
John Rizzo, a former top public affairs officer for the Treasury, referred to a Republican proposal to designate whether payments should be handled as a mandated default.
