Connect with us

Business

US debt ceiling will require Treasury ‘extraordinary measures’ to avoid default

News Agencies

Published

on

Treasury Secretary Janet Yellen disclosed the debt bomb on Friday noting the government will reach that ceiling next week on Jan. 19 when the debt balloons to $31.38 trillion.

“Once the limit is reached, Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations,” she said while listing two of those measures.

JAMIE DIMON SOUNDS ALARM ON RISING DEBT HAVING ‘POTENTIALLY DISASTROUS OUTCOMES’

Advertisement
Treasury building

The Department of the Treasury building in Washington, D.C., Aug. 29, 2022.

Extraordinary measures are accounting and budgetary tools the Treasury Dept. uses to avoid until Congress takes action on the debt limit to let the federal government resume borrowing. They don’t last forever, and their duration depends on how much the government is spending. Yellen did note while there is much uncertainty,  “it is unlikely that cash and extraordinary measures will be exhausted before early June.”

FOX Business takes a deep dive into the situation and the measures that are aimed at staving off the threat of default.

The debt limit or debt ceiling 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, the Treasury Department detailed.

Advertisement

READ ON THE FOX BUSINESS APP

The limit was boosted to approximately $31.381 trillion on Dec. 16, 2021.

The Government Securities Investment Fund, known as the G Fund, is a money market retirement fund for federal employees enrolled in the Thrift Savings Plan (TSP) that gets invested in special-issue Treasury securities that mature daily and are typically reinvested. The G Fund’s balance was about $210.9 billion as of Dec. 31, 2022.

Advertisement

When the federal government is operating at the debt limit, the Treasury Dept. has the authority to stop fully investing in the G Fund from day to day to prevent it from exceeding the debt limit. For example, if the Treasury wants to create $10 billion of space under the debt limit to allow the agency to sell more debt securities to the public that finance federal spending, it would simply not invest that amount on a given day.

After the debt limit is either raised or suspended, the G Fund is required to be made whole with interest, so federal employees and retirees who invest in it through the TSP are ultimately unaffected despite the accounting maneuvers.

Advertisement

US NATIONAL DEBT ON PACE TO BE 225% OF GDP BY 2050, PENN WHARTON SAYS

Treasury Secretary Janet Yellen

U.S. Treasury Secretary Janet Yellen

Treasury can also declare a “debt issuance suspension period” during which the agency delays some of its accounting moves to free up cash during a specific window of time. During this period, the agency can suspend making new investments and redeem certain existing investments in a pair of federal pensions.

It affects the Civil Service Retirement and Disability Fund (CSRDF), which is the main pension fund for federal employees; in addition to the smaller Postal Service Retiree Health Benefits Fund (PSRHBF), which funds the healthcare expenses of retired Postal Service employees. Both funds are invested in special-issue Treasury securities.

Advertisement

GET FOX BUSINESS ON THE GO BY CLICKING HERE

The Treasury Dept. noted in August 2021 that each month of a debt issuance suspension period frees up temporary headroom of about $7 billion from the CSRDF plus about $300 million from the PSRHBF through the early redemption of investments in those funds. At the end of the suspension period, the net increase in budgetary headroom goes away because those securities would’ve matured at that date.

Advertisement
Continue Reading
Advertisement

Advertisement

Breaking News

Editor Pick’s

Latest Entertainment

Entertainment8 hours ago

Who is Navarone Garcia? The half-brother of Lisa Marie Presley gives rare interview about his famous family.

Navarone Garcia, the half-brother of Lisa Marie Presley, gives a rare interview about his famous family. He and his sister...

Entertainment8 hours ago

Jessica Simpson details secret romance with ‘massive movie star’: ‘I took the pillowcase he slept on’

Jessica Simpson opened up about a secret romance with an unnamed movie star. (Photo by Amy Sussman/Getty Images) Jessica Simpson...

Entertainment10 hours ago

Pete Davidson is unrecognizable as he steps out with new buzz cut at Knicks game

Pete Davidson’s latest haircut is unlike any of his previous looks. At a New York Knicks game Jan. 31, the...

Entertainment10 hours ago

Savannah Chrisley gives an update on Todd and Julie’s lives in prison: ‘There’s days that are tough. There’s struggles.’

Savannah Chrisley appears on Chrisley Knows Best. (Photo: Tommy Garcia/USA Network/NBCU Photo Bank) Savannah Chrisley understands it’s weird to say...

Entertainment10 hours ago

Frasier revival will bring Kelsey Grammer back to Boston (and maybe a certain bar)

SportsUs Weekly Succession’s Brian Cox Says Sons Urged Him to Do Michelob Ultra’s 2023 Super Bowl Ad: They Need to...

Entertainment11 hours ago

Doja Cat Defends Britney Spears After ‘Disrespectful’ Comments Comparing Their Shaved Heads

Doja cat, Britney Spears Pascal Le Segretain/Getty, Jon Kopaloff/FilmMagic Doja Cat and Britney Spears Doja Cat is sticking up for...

Entertainment11 hours ago

Taylor Lautner Reveals He Thought Kanye West Interrupting Taylor Swift at the 2009 VMAs Was a ‘Practiced Skit’

Taylor Lautner with Kanye West and Taylor Swift insetted. Shutterstock (2) Taylor Lautner is going back to the 2009 Video...

Entertainment11 hours ago

Pamela Anderson claims Kid Rock called her ‘a whore’ amid blowup over her ‘Borat’ appearance

Kid Rock and Pamela Anderson arrive at the 29th Annual American Music Awards at the Shrine Auditorium in Los Angeles...

Advertisement

Latest Sports

Technology Hot News

Technology2 weeks ago

Led by "Amazon" and "Microsoft" .. the technology giants are planning to lay off 64,000 employees

After 10 years of driving the stock market bull run, big tech companies are racing to downsize staff to adapt...

Technology2 weeks ago

Apple introduces MacBooks with new M2 processors

Yesterday, Tuesday, Apple unveiled MacBooks powered by the new, faster “M2 Pro” and “M2 Max” processor chips, in a surprise...

Technology2 weeks ago

All you need to know about the upcoming Galaxy S23 phones from Samsung

Samsung has officially announced that the (Galaxy Unpacked 2023) event will be held this year on Wednesday, February 1, which...

Technology2 weeks ago

FTX Exchange Announces Hacking and Stolen $415 Million in Cryptocurrency

Bankrupt American cryptocurrency firm FTX announced today, Wednesday, that $415 million in cryptocurrency has been hacked and stolen from the...

Technology2 weeks ago

Because of a "fraudulent tweet"… Elon Musk's trial begins

Elon Musk's trial began Tuesday in San Francisco with the selection of jury members who will have to decide whether...

Technology2 weeks ago

An electric spoon replaces salt and spices, but with conditions

Experts have developed an electric spoon that is able to replace spices and flavors and affect the taste buds in...

Technology3 weeks ago

The biggest dangers of using tracking devices.. so you can escape?

If you spot an unknown Bluetooth tagging device, there are ways to disable the device so it can't track your...

Technology3 weeks ago

New Twitter.. For You tab to web version

The Twitter platform announced that it will bring the new tab (For You), which launched last Tuesday for iPhones and...

Advertisement