Treasury Secretary Janet Yellen wrote in a letter to congressional leaders that the government would begin taking a series of ‘extraordinary measures’ to stave off its first-ever default.

The U.S. government hit its debt limit on Thursday, pushing the Treasury Department to resort to “extraordinary measures” to extend the date that it’s expected to run out of money amid a precarious partisan battle that threatens the first-ever default on the national debt.

Treasury Secretary Janet Yellen wrote in a letter to congressional leaders that the government would begin repurposing federal funds to stave off a default – which has not occurred in the nation’s history – as the nation hit its $31.4 trillion limit on Thursday. Though the measures are temporary, they buy lawmakers time to reach an agreement on raising the borrowing limit.

Yellen wrote in a letter to congressional leaders last week alerting them to the approaching debt limit, reminding them that it is “critical that Congress act in a timely manner to increase or suspend the debt limit,” while warning that “failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all American and global financial stability.”

But a simple resolution to raising the debt ceiling does not appear likely at present. The development comes as a debt limit standoff has been brewing in Congress, with some Republicans expressing interest in using the new GOP House majority to seek spending cuts while leveraging the potential default. Meanwhile, Democrats have warned of reckless “political brinkmanship” from Republicans and the White House has remained adamant that addressing the debt limit should be done in a bipartisan manner “without conditions.”

House Speaker Kevin McCarthy told reporters earlier this week that he’d like to sit down with leaders, including the president, to “start having discussions.”

“I don’t see why you would continue the past behavior,” McCarthy said, likening raising the debt ceiling without spending cuts to giving an irresponsible child a higher credit limit. “Would you keep doing that or would you change the behavior?”

It remains unlikely that cash and the extraordinary measures will run out before summer, Yellen wrote in the letter to congressional leaders, allowing the government to continue paying its bills until June 5. But she urged Congress to “act promptly” due to the “considerable uncertainty” of the period.

Economists have likened the situation to 2011, when prolonged negotiations over the debt ceiling led to a debt downgrade and increased volatility in the market. Jamie Dimon, CEO of JPMorgan Chase, warned on Thursday that lawmakers should take the debt limit seriously, telling CNBC’s “Squawk Box” that “we should never question the creditworthiness of the United States government.”

“Of course, Democrats can blame the Republicans and Republicans can blame the Democrats. I don’t care who blames who – even questioning it is the wrong thing to do,” Dimon said. “That is just a part of the financial structure of the world. This is not something you should be playing games with at all.”

Source By: usnews