Treasury Secretary Janet L. Yellen initiated special accounting tools Thursday to extend the government’s ability to borrow as the federal debt bumped into a $31.4 trillion statutory limit.
The bookkeeping maneuvers employed by Treasury suspend investments in several government accounts, temporarily reducing the amount of debt below the borrowing ceiling and preventing additional debt from being added.
That in turn provides “headroom” for Treasury to borrow hundreds of billions of dollars more which, combined with tax revenue, is used to make payments to bondholders, pay Social Security benefits, cover the costs of government agencies and programs and other obligations.
Yellen told Congress last week the debt limit would be reached Thursday, and her agency would start deploying extraordinary measures then. Due to the challenges of forecasting government payments and receipts months into the future, she said it’s uncertain how long the measures would last. But she said it’s “unlikely that cash and extraordinary measures will be exhausted before early June.”
The accounting tools Yellen put in place Thursday are part of a “debt issuance suspension period” set to last through June 5. But she reiterated that it wasn’t yet clear how long Congress would have until they need to act.
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Treasury said the first set of extraordinary measures include redeeming existing, and suspending new, investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.
The Civil Service Retirement and Disability Fund provides a pension to retired and disabled federal employees covered by the civil service retirement system. The Postal Service Retiree Health Benefits Fund helps pay for the cost of health insurance held by retired postal workers.
By declaring a debt issuance suspension period, the agency is allowed to suspend the investment of contributions to the retirement and disability fund from federal employees and agencies, as well as interest payments on securities held by the fund and the proceeds of maturing securities. Investments in the postal fund are similarly suspended.
After the debt limit is raised, Treasury restores the various funds’ investments. “Federal employees and retirees will be unaffected by these actions,” Yellen wrote.
Treasury has previously estimated that early redemptions of existing investments and suspending new investments of the federal employee and postal worker funds would free up roughly $19 billion per month in room under the debt limit.
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