The United States has officially reached its statutory debt limit (pdf) of $31.381 trillion on Jan. 19 as was predicted by Treasury Secretary Janet Yellen in a letter to Congress (pdf) on Jan. 13. The Treasury Department will now have to implement extraordinary measures to prevent default on the national debt.
In her letter, Yellen explained that the debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.
“Presidents and Treasury Secretaries of both parties have made clear that the government must not default on any obligation of the United States,“ Yellen wrote.
The Treasury Department may use accounting and budgetary measures known as “extraordinary measures” to avoid defaulting on the national debt until Congress takes action to raise the debt limit and allow the government to borrow again. The duration of these measures depends on the government’s spending levels and is not permanent. The Treasury Department will only be using two of the four available extraordinary measures during the initial phase of the debt limit standoff.
Two Extraordinary Measures
The Treasury anticipates implementing these two extraordinary measures this month, January 2023. Firstly, to redeem existing, and suspend new, investments of the Civil Service Retirement and Disability Fund (CSRDF), and the Postal Service Retiree Health Benefits Fund (Postal Fund). Secondly, reinvestments of the Government Securities Investment Fund (G Fund) of the Federal Employees Retirement System Thrift Savings Plan, will be suspended.
Congress has provided the Treasury authority to use these measures that, according to Yellen, will “reduce the amount of outstanding debt subject to the limit and temporarily provide additional capacity for Treasury to continue financing the operations of the federal government.” She explained that after the debt limit impasse has ended, the CSRDF, Postal Fund, and G Fund will be made whole.