The US reached its debt limit and the Treasury began to take measures to avoid default
“I respectfully urge Congress to act quickly to protect America's full guarantee,” said Treasury Secretary Janet Yellen
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FILE PHOTO. The Treasury Department in Washington, U.S., April 25, 2021. REUTERS/Al Drago
The The US Treasury began taking steps Thursday to prevent a default on government debt as Congress heads into a high-profile showdown. risk between Democrats and Republicans due to the increase in the debt limit.
Those “extraordinary measures” may help reduce the amount of outstanding debt subject to the limit, currently set at $31.4 trillion, but Treasury warned that these tools would only help for a limited time, likely no more than six months. .
Janet Yellen, in a letter to the Speaker of the House, Republican Kevin McCarthy.
Yellen, the Treasury officer in Democratic President Joe Biden's government, had said last week that “failure to meet government obligations would cause irreparable harm to the American economy, the livelihoods of all Americans, and financial stability.” world.”
A default would damage the credibility of the United States, something that should never happen, warned the chief executive of JPMorgan Chase, the main bank of the country.
“We should never question the solvency of the United States government,” Jamie Dimon said in an interview with CNBC. “That is sacrosanct. It should never happen.”
Risky and dangerous
The world's largest economy could face severe disruption, with opposition Republicans threatening to reject an increase in the legal debt ceiling, whichcould push the United States into default.
The far-right Republicans, who now hold key power in the party's narrow majority in the House, want Biden to agree to cutting public spending.
They argue that deep cuts are needed to reduce debt, which Congress has generally agreed to increase each year, raising the so-called debt ceiling.
But the House Blanca has said that those cuts would hit key military and Social Security spending programs, or lead to major new taxes.
The White House also promised that Biden would not negotiate with hardline Republicans given his “risky and dangerous” opposition to raising the debt ceiling.
House Members of United States Representatives gather for the fourth round of voting to elect a new Speaker of the House on the second day of the 118th Congress on Capitol Hill in Washington, United States. January 4, 2023. REUTERS/Jonathan Ernst
For now, the Treasury would not be able to fully invest a portion of the Civil Service Disability and Retirement Fund, with a “debt issuance suspension period” that will last until early June.
Treasury will also halt further investment of amounts credited to the Postal Service Retiree Health Benefit Fund, Yellen said in announcing the latest measures.
The Treasury will begin to reduce its cash balances and resort to accounting techniques and tools to allow the government to continue its functions, said Mickey Levy of Berenberg Capital Markets.
But according to this analyst, the probability that the US government defaults on its debt is close to zero.
“I think ultimately (… ) there will be a agreement to raise the debt ceiling, but from time to time there will be a lot of debate and spiteful politics,” Levy told AFP.
If things stay as they are, however, spending will continue to rise and increase debt, he said, adding that much of it goes to programs like Social Security and federal health insurance Medicare.
“There just isn't the political will to really address these programs,” he said.
With inf AFP formation