The Treasury Department announced it will start taking \u201cextraordinary measures\u201d next week to prevent the U.S. from defaulting on its debt obligations and potentially plunging the country into an economic crisis.<\/p>\n
In a letter addressed<\/a> Friday\u00a0to House Speaker Kevin McCarthy, Treasury Secretary Janet Yellen<\/a> implored Congress to raise the debt ceiling and said the government will reach its borrowing limit on Thursday \u2013 the current limit is around $31.4 trillion. To avoid a default, the department will be reallocating federal funding to continue paying the government\u2019s debts.<\/p>\n The department is unable to provide a precise\u00a0estimate on how long the U.S. can keep paying its debts before\u00a0Congress needs to raise its borrowing limit, but Yellen wrote that it is unlikely the measures \u201cwill be exhausted before early June.\u201d<\/p>\n Stay in the conversation on politics:<\/strong>Sign up for the OnPolitics newsletter<\/a><\/p>\n \u201cIt is therefore critical that Congress act in a timely manner to increase or suspend the debt limit,\u201d Yellen wrote. \u201cFailure to meet the government\u2019s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.\u201d<\/p>\n Shai Akabas, director of economic policy at the Bipartisan Policy Center, said the letter does not mean it is time for panic, at least not yet.<\/p>\n\n “It is certainly a time for policy makers to begin negotiations in earnest,” said Akabas. “We’ve seen all too many times that they end up at the 11th hour with their backs against the wall and no resolution in sight. There’s plenty of time to avoid that outcome.”<\/p>\n The move is to cover expenses the government already has incurred, not to pay for new spending yet to be approved. Ultra conservatives on Capitol Hill have tried to use previous debt ceiling votes as leverage to exact spending concessions but have done so with little success.\u00a0This time could be different given how much influence far-right Freedom\u00a0Caucus members in the House now wield.<\/p>\n\n The letter is a preview of what is expected to be an intense showdown in Washington over the coming months. Congress has regularly voted<\/a> to raise the debt limit to prevent the U.S. from defaulting on its debts and avert economic chaos but Republicans who captured the House have said they don’t want to approve another one without significant concessions.<\/p>\n McCarthy has offered a short preview<\/a> of the fight to come. In his first press conference as speaker, McCarthy said Republicans are looking to negotiate spending cuts in exchange for raising the debt ceiling.<\/p>\n\n \u201cWe don\u2019t want to put any fiscal problems on our economy and we won\u2019t,\u201d McCarthy said. \u201cWe\u2019ve got to change the way we are spending money wastefully in this country and we are going to make sure that happens.\u201d<\/p>\n On Friday afternoon, the White House said it has no intentions of negotiating any budget cuts to lift the debt ceiling.<\/p>\n “We will not be doing any negotiation over the debt ceiling,” said White House press secretary Karine Jean-Pierre. “This should be done without conditions.”<\/p>\n Senate Majority Leader Chuck Schumer, D-N.Y., noted that the debt ceiling was raised three times when Donald Trump was president.<\/p>\n “A default forced by extreme MAGA Republicans could plunge us into a deep recession, spike inflation, lead to even higher costs for working families on everything from mortgages and car loans to credit card interest rates,” Schumer tweeted Friday.<\/a><\/p>\n![\"Treasury](\"https:\/\/www.gannett-cdn.com\/presto\/2023\/01\/13\/USAT\/33d90f60-077a-4d21-9b3e-a369952ce6b9-AP_Debt_Limit.jpg?width=660&height=441&fit=crop&format=pjpg&auto=webp\")
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