US Hits Debt Peak, Government Must Take ‘Extraordinary Action’

In a letter to Congress, Treasury Secretary Janet Yellen said the government must initiate “extraordinary measures” with emergency funding. The first measures concern the Pension Fund of Government Employees. That will be possible until Monday, June 5, after which the government will run out of money.

Due to these emergency measures, the damage will be minimal now. But Yellen is urging policymakers to raise or suspend the established ceiling. With the House currently dominated by a Republican majority and Democrats trying to thwart President Biden’s policies as much as possible, that decision is unlikely. If the two sides fail to reach a consensus by June, the debt ceiling would trigger an economic shock and a wholesale freeze on all federal government spending.

US Treasury Secretary Janet Yellen.  Image by AFP

US Treasury Secretary Janet Yellen.Image by AFP

“This period of extraordinary activity is accompanied by great uncertainty, such as the challenge of predicting months of future US government payments and receipts,” Yellen writes. “I urge Congress to act quickly to protect the full faith and goodwill of the United States.”

Reaching the debt ceiling is the result of decades of tax cuts combined with increased government spending by Republicans and Democrats. Since 1960, the credit limit has been suspended or increased dozens of times, often without much problem. In December 2021, the debt ceiling was raised by $2.5 trillion.

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