US suspends issuing new debt amid Congressional standoff
The US Treasury said on Thursday that it had begun taking measures to prevent a default on government debt as the country hits its borrowing limit.
Congress is gridlocked over raising this debt ceiling; the issue has been a fairly frequent feature of US politics in recent years.
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” Treasury Secretary Janet Yellen wrote in a letter to Congressional leadership, in announcing the start of “extraordinary measures” to prevent at least a technical debt default.
The Treasury has warned Congress that the tools it’s employing to put a stop to new borrowing will only help for a limited time — likely not longer than six months. In Yellen’s letter on Thursday, she cited June 5 as the likely cutoff date at present.
If past instances are anything to go by, politicians breaking the deadlock before this date is probably the more likely way out of the impasse.
Yellen had already warned of risk of ‘irreparable harm’
Yellen said that because of the “debt issuance suspension,” the Treasury Department would be unable to fully invest a portion of the Civil Service Retirement and Disability Fund, among other impacts.
Opposition Republicans have so far refused to authorize the annual approval of continued government borrowing for 2023. Although this authorization is considered almost automatic, the US has faced similar standoffs in the past, most notably during the period of Barack Obama’s two terms where the Democrats did not control both houses of Congress.
The Republicans are in the majority in the House of Representatives, while the Democrats only just retained their grip on the Senate in November 2022’s midterm elections.
Yellen had written another appeal last week, warning that “failure to meet the government’s obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability.”
How large is the US sovereign debt burden?
The debt limit is currently set at $31.4 trillion (roughly €29,000,000,000,000), more than the country’s annual GDP, which stood in the region of $23 trillion in 2021, the last full year with available data.
Like most national governments around the world, US borrowing levels rose substantially during the COVID pandemic — and also in the decade following the 2008 financial crisis. At the end of 2019, US debt had stood at roughly $23 trillion. At the end of 2007, it was around $9 trillion.
By comparison, Germany’s national debt of roughly €2.5 trillion is a little less than annual GDP, but it too has been rising rapidly as a share of GDP in the last couple of years.
msh/rt (AFP, Reuters)
Article source: https://www.dw.com/en/us-suspends-issuing-new-debt-amid-congressional-standoff/a-64454812?maca=en-rss-en-bus-2091-xml-atom