US hitting debt ceiling, Janet Yellen says Treasury Division is taking extraordinary motion

U.S. Treasury Secretary Janet Yellen delivers a news conference at the US Treasury Department Cash Room on July 28, 2022 in Washington, United States.

Jonathan Ernest | Reuters

The Treasury Department has begun taking so-called extraordinary measures to continue paying the federal government’s bills as the US hit its debt ceiling on Thursday, Treasury Secretary Janet Yellen said.

In a statement to House Speaker Kevin McCarthy, R-Calif both moves are subject to “significant uncertainty” if Congress doesn’t pass legislation raising the $31.4 trillion debt ceiling.

The finance minister told lawmakers on Friday that the extraordinary steps could allow the government to settle its obligations by early June. Yellen last week urged Congress to “act in a timely manner to raise or suspend the debt ceiling” as doing so could not result in a first-time US debt default and wreak economic damage around the world.

The White House also asked Congress on Friday to raise the debt ceiling “unconditionally.”

The Treasury Secretary warned last week that the US government would hit the legal debt ceiling on Thursday, after which extraordinary measures would be taken to prevent the government from defaulting on its debt obligations.

The US government has not defaulted on its debt, but the debt ceiling has increased 22 times from 1997 to 2022, according to the Government Accountability Office. According to a senior White House official, the Biden administration will prioritize negotiations on a new bill to raise the debt ceiling after the mid-April tax deadline.

Concessions sought by the majority of the new Republican House of Representatives have raised concerns that Congress could struggle to raise the debt ceiling before June. Certain GOP lawmakers have said they want to cut spending as part of an agreement to raise the borrowing limit.

Some Republican officials have said significant spending cuts on key government programs like Medicare and Social Security were part of the negotiations that helped McCarthy secure support from hard-line conservatives and win the speakership.

McCarthy has called for cuts to avoid bankrupting programs like Medicare and Social Security.

“You couldn’t just keep increasing it,” he said on Fox News Channel’s Fox News Sunday. “Let’s sit down and change our behavior for the good of America. Because what we’re going to do is bankrupt this country and these claims if we don’t change their behavior today.”

Other House Republicans, such as Representatives Ralph Norman of South Carolina and Chip Roy of Texas, have also called for spending cuts before raising the debt limit.

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“They only have so many leverage and negotiating points. The debt ceiling is one of them,” Roy said.

White House press secretary Karine Jean-Pierre told reporters this week that President Joe Biden was unwilling to put any conditions on the debt ceiling negotiations.

“This is just another attempt by congressional Republicans to force unpopular cuts to programs critical to seniors, the middle class and working families. Congress must act, and act quickly. There is no excuse for political daring,” Jean-Pierre said on Tuesday.

The debt brake limits the amount of federal debt. The repeal will ensure the government can continue to borrow, not spend, to meet its budgeted goals.