US Treasury to begin 'extraordinary measures' to avoid default
The US Treasury on Friday will begin "extraordinary measures" to prevent a default as the government again bumps up against legal limits on its borrowing authority.
The move comes as lawmakers on Capitol Hill haggle into the 11th hour over an agreement on raising the so-called debt ceiling so the federal government can continue borrowing to fund its operations.
As of noon Friday, the Treasury will suspend the sale of certain securities for state and local governments that count towards the debt limit, Treasury Secretary Steven Mnuchin said Wednesday in a letter to congressional leaders.
"As in the past, it is likely Treasury will utilize additional extraordinary measures as well," Mnuchin wrote.
Because the federal government traditionally runs a budget deficit, it has no choice but to borrow to pay interest on its existing debts as well as fund payrolls, retirement benefits, social spending and other expenses approved by Congress.
As a result, a bitterly divided Congress, where conservative lawmakers have frequently opposed deficit spending, has repeatedly verged on the brink of default before reaching last-minute agreements to keep the government open.
In September, as part of a compromise with opposition Democrats that also funded relief for hurricane-stricken areas, lawmakers approved a temporary suspension of the debt limit until Friday.
That means that beginning Saturday, the US will no longer be able to raise cash by tapping debt markets.
However, according to the Congressional Budget Office, similar extraordinary measures mean President Donald Trump's administration can continue to function until spring while still making timely payments to meet its obligations, such as Social Security and Medicare.
Analysts say a default by the US would have catastrophic consequences for the world financial system.
"As I have said previously, honoring the full faith and credit of the United States is a critical commitment," Mnuchin wrote Wednesday.
"I encourage Congress to raise the debt limit at the first opportunity so that we can proceed with our joint priorities."