The US Treasury takes “extraordinary measures” on the debt

The countdown to a possible default on government debt America is about to begin, and friction between President Joe Biden and Republican lawmakers is raising fears that the country will be able to fend off a potential economic crisis.

The Treasury Department said Thursday in a letter to the heads of the legislature that it has begun to take “extraordinary measures” as the government approaches the limit of its legal borrowing capacity of 38.381 million dollars. The artificially imposed debt limit has been raised some 80 times since the 1960s.

So far markets remain calm because the government can resort to accounting maneuvers to stay open for now, and any threat to the economy would be several months away. Many analysts, despite their fears, take it for granted that there will be a deal.

But this moment seems more tense than previous similar occasions because of the great differences between Biden and the new speaker of the House of Representatives, Kevin McCarthy, who heads a surly Republican caucus.

These differences increase the risk that the government could default on its financial obligations for political reasons, a problem that would rock financial markets and, if not resolved, would plunge the world’s largest economy into an entirely avoidable recession.

The couple has several months to forge an agreement, while Treasury applies its “extraordinary measures” to keep the government running, at least until June. But partisan hostility that has been building for years has led to a conflicting set of demands that jeopardizes the ability of lawmakers to work together and fulfill a fundamental duty.

Biden insists on a cap increase so that current financial obligations can be met, refusing to even talk to Republicans. McCarthy calls for negotiations that he believes will lead to spending cuts. It’s unclear how much he wants to cut and whether his fellow Republicans would accept any deal after a contentious start to the session that required 15 rounds of voting to elect McCarthy as speaker.

Asked twice Wednesday if there were any indications that Republican lawmakers can ensure default will be avoided, White House press secretary Karine Jean-Pierre said they have a “constitutional responsibility” to protect good faith and country credit. She did not clarify whether the presidency sees signs at this point that the danger of default has disappeared.

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