What’s next after U.S. reaches its debt limit

BRYAN, Texas (KBTX) – U.S. Treasury Secretary Janet Yellen says in a letter to congressional leaders that she’s suspending the reinvestment of some federal bonds in a government workers’ savings plan.

This “extraordinary” measure is meant to buy time for President Joe Biden and Congress to raise the nation’s debt limit after the government bumped up against its legal borrowing capacity last Thursday.

“I think the word extraordinary is hyperbole but they’re taking accounting measures by not contributing to federal retirement for ex-federal employees or military members but they’ll contribute later when this fight ends,” said Texas A&M economist Dennis Jansen.

Yellen said the action will help enable the government to stay open until roughly June.

“Congress has been passing budgets that are not balanced and we’ve been borrowing large amounts of money on an ongoing basis for decades,” said Jansen. “Currently our debt-to-GPD ratio is close to 100% and the congressional budget office thinks it will be 125% in the next decade.”

In economics, the debt-to-GDP ratio is the ratio between a country’s government debt and its gross product.

Jansen said the U.S. is continuously needing to borrow more because when the debt ratio goes up, we have to have borrowed money to cover that debt.

You can watch the full interview from First News at Four in the video player above.

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