The Treasury Department says it has started taking “extraordinary measures” as the government has brushed up against its borrowing capacity of $31.381 trillion. Political frictions are raising alarms about avoiding a potential economic crisis.
“Why create a crisis over this?” McCarthy said this week. “I mean, we’ve got a Republican House, a Democratic Senate. We’ve got the president there. I think it’s arrogance to say, ‘Oh, we’re not going to negotiate about pretty much anything’ and especially when it comes to funding.”
In order to keep the government open, the Treasury Department on Thursday was making a series of accounting maneuvers that would put a hold on contributions and investment redemptions for government workers’ retirement and health care funds, giving the government enough financial space to handle its day-to-day expenses until roughly June.
Analysts at Bank of America cautioned in a report last week that “there is a high degree of uncertainty about the speed and magnitude of the damage the U.S. economy would incur.” Still, if past debt ceiling showdowns such as the one that occurred in 2011 are any guide, Washington may be in a nervous state of suspended animation with little progress until the “X-date,” the deadline when the Treasury’s “extraordinary measures” are depleted.
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