U.S. hits credit limit. Amid fears of debt default, Treasury begins 'extraordinary' measures

The Treasury's 'extraordinary measures' are meant to avoid a default as a debt ceiling fight looms in Congress.

Maureen Groppe
Michael Collins
USA TODAY

WASHINGTON – The Treasury Department Thursday began “extraordinary measures” to pay the nation’s bills after reaching a limit on how much it's allowed to borrow, Treasury Secretary Janet Yellen told Congress.

While the United States has been in this position before, fears are rising over whether political brinkmanship will prevent the limit from being raised as it has in the past, risking an economic calamity. 

The amount of time the Department can continue taking steps to avoid defaulting on the debt unless the $31.381 trillion limit is raised is uncertain, Yellen wrote in her letter to lawmakers. But the government is expected to be able to keep operating until at least June.

“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” she said.

Related:5 ways your finances could be impacted if the debt ceiling isn't raised by the deadline

What happens if the debt ceiling is it?:Here's what to expect if we reach debt limit.

Treasury Secretary Janet Yellen speaks at the Treasury Department in Washington, Jan. 10, 2023. The federal government is on track to max out on its $31.4 trillion borrowing authority as soon as this month. That starts the clock on an expected standoff between President Joe Biden and the new House Republican majority.
Some House Republicans are insisting Democrats agree to spending cuts in exchange for Congress raising the debt limit.

“We cannot raise the debt ceiling,” Rep. Andy Biggs, R-Ariz., tweeted Tuesday. “Democrats have carelessly spent our taxpayer money and devalued our currency. They've made their bed, so they must lie in it.”

The White House insists the limit be raised “without conditions.”

“We're not going to negotiate on this,” White House press secretary Karine Jean-Pierre said Tuesday. “The basic duties of Congress is to deal with this issue.”

The debt ceiling refers to the maximum amount the U.S. government can spend on its existing obligations, including Social Security and military salaries. Voting to raise the debt ceiling would not be a vote to spend more money. Without a higher debt ceiling, the government would default on bills it already has incurred and has committed to pay.

Economists warn that defaulting on its debt – something the U.S. has never done – could cause financial markets to tank, hurting 401(k)s and other investments. A debt ceiling standoff in 2013 cost the economy 1% in GDP.