U.S. hits debt limit and Treasury Department begins ‘extraordinary measures’
The U.S. Treasury Department in Washington, D.C., on Saturday, March 26, 2022 (Photo by Marisa Demarco/Source New Mexico)
WASHINGTON — The nation reached its debt limit Thursday, beginning the uncertain process known as extraordinary measures, in which the U.S. Treasury Department uses accounting maneuvers to avoid defaulting on the debt.
The often-used practice is intended to give the Republican House, Democratic Senate and Biden administration time to negotiate a bipartisan agreement to raise the debt ceiling to a dollar figure or suspend it through a certain date.
This year’s debate over how exactly to do that is expected to be especially tense after Speaker Kevin McCarthy, a California Republican, made promises to several of his party’s more conservative members in exchange for the votes needed for him to hold the gavel.
Democrats and the White House are adamant they won’t agree to drastic spending cuts to discretionary programs, which fund the vast majority of federal agencies, or mandatory programs like Social Security, Medicare and Medicaid.
The stalemate could have significant impacts on the global economy, financial markets and the nation’s credit rating the longer it goes.
If disagreements about how to address the debt limit last too long, the Treasury Department will exhaust extraordinary measures and the nation would default on the debt for the first time.
Manchin gets involved
White House Press Secretary Karine Jean-Pierre said Wednesday during the daily briefing that the Biden administration is “just not going to negotiate” on the debt ceiling, especially since Republicans voted three times to suspend it during the Trump administration.
“So it is essential for Congress to recognize that dealing with the debt ceiling is their constitutional responsibility,” Jean-Pierre said. “This is an easy one. This is something that should be happening without conditions.”
West Virginia Democratic Sen. Joe Manchin III, however, is pressing the White House and congressional leaders to begin negotiations, saying during an interview on Fox Business that he’s already spoken to McCarthy about the issue.
Manchin noted that Congress could put in place another committee to look at ways to address the rising national debt, though he said lawmakers would hold the line on Social Security.
“We’re not getting rid of anything, and you can’t scare the bejesus out of people saying we’re going to get rid of Social Security, we’re going to privatize. That’s not going to happen,” Manchin said from the World Economic Forum winter meeting in Davos, Switzerland.
“But we should be able to solidify it, so the people who have worked and earned it know they’re going to get it.”
Debt limit reached
Treasury Secretary Janet Yellen wrote to Congress last week, to inform members the United States would reach its $31.385 trillion borrowing limit Jan. 19.
She wrote to lawmakers again Thursday, telling them the country had in fact reached its debt limit and she had begun using some of the extraordinary measures to keep paying all of the country’s bills in full and on time.
The accounting maneuvers will likely last until at least early June, but Yellen continued pressing Congress on Thursday to get a deal together sooner rather than later.
“As I stated in my January 13 letter, the period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. Government months into the future,” Yellen wrote. “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”
McCarthy made several concessions to the more right-leaning members of his party in exchange for many of them voting present so that he could become speaker with fewer than 218 votes, a majority of the 435-member House.
Among those was not agreeing to a debt limit increase without a budget agreement or “commensurate fiscal reforms.”
McCarthy also agreed to several changes to both discretionary programs, which are funded annually through the appropriations process, and mandatory programs, which essentially run on autopilot.
He promised to lower discretionary spending for federal agencies by at least $130 billion in order to go back to fiscal 2022 levels as well as working toward “reforms to” the budget process and mandatory spending programs. Such programs include Social Security, Medicare and Medicaid.
‘Ticking time bomb’
Pennsylvania Democratic Rep. Brendan Boyle, ranking member on the House Budget Committee, said in a written statement Thursday that “the debt ceiling is officially a ticking time bomb we can’t diffuse soon enough.”
Boyle added; “The fact that Republicans are ready and willing to unleash an economic doomsday in their quest to cut Social Security, Medicare, and other vital programs shows just how untethered from reality, and uninterested in governing, the extreme MAGA Republican party has become.”
House Budget Chairman Jodey Arrington, a Texas Republican, wrote on Twitter that “the last thing we need to do is give Biden and the Democrats a new credit card.”
“We will pay our debts, but we will not enable politicians to bankrupt our country.”
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