Treasury Starts Additional Steps to Avoid Breaching Debt Limit

Treasury Starts Additional Steps to Avoid Breaching Debt Limit

© Bloomberg. The U.S. Treasury Department in Washington, D.C., U.S., on Monday, July 26, 2021. Senators negotiating a $579 billion infrastructure package are aiming to finish negotiations early this week, under pressure from colleagues to salvage an August recess and to allow the Senate to turn to preventing a government shutdown and debt ceiling default in the fall. Photographer: Stefani Reynolds/Bloomberg

(Bloomberg) — The Treasury Department began using additional special measures to avoid U.S. default, after the debt limit was reinstated Sunday following a two-year suspension.

The department is pausing new investments in several federal employee retirement and benefit funds, Treasury Secretary Janet Yellen said Monday in a letter to Congress. Previous secretaries have taken similar action during prior episodes over the limit, Yellen wrote.

Unless Congress raises or suspends the debt ceiling again, the U.S. may be headed toward default as early as October. Treasury used its first special measure on Friday to avoid breaching the limit by halting the sale of certain state and local bonds.

“I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible,” Yellen said in the document.

Democrats have yet to propose a plan for tackling the debt limit prior to Treasury running out of cash to pay its obligations. Lawmakers are set to go on August recess in the coming days, and won’t return to Washington until September.

As a result, Treasury will need to curtail borrowing in coming months to preserve cash.

©2021 Bloomberg L.P.

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