Republicans demand massive cuts in social spending as countdown begins for debt ceiling crisis |

Treasury Secretary Janet Yellen notified the leaders of the House and Senate in a letter Thursday that the US government has reached the debt ceiling of $31.4 trillion, set in a 2021 law, and that her department would begin a series of “extraordinary measures,” deferring some payments within the federal government itself, that would allow normal operations to continue until early June.

Treasury Secretary Janet Yellen [AP Photo/Luca Bruno]

These measures include suspending payments into health and retirement funds for federal and postal workers, with the pledge to make up the shortfall after Congress raises the debt ceiling to allow for additional federal borrowing. “Federal employees and retirees will be unaffected by these actions,” Yellen claimed in her letter to Congress.

Because of the influx of tax payments linked to the April 15 deadline for filing the federal income tax, Yellen said that the “debt issuance suspension period” would last through June 5.

But she acknowledged, “The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the government months into the future… I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”

Congress has raised the federal debt ceiling or suspended its effect nearly 80 times since 1960, according to the Treasury Department, but in the last 25 years this has become a contentious action when Congress and the presidency were controlled by different parties. The first such standoff took place in 1995, with Republican Newt Gingrich as House Speaker and Democrat Bill Clinton in the White House.

In 2011, the Republican-controlled House of Representatives came close to forcing a US government default on debt and the Obama administration agreed to the passage of the Budget Control Act, which straitjacketed federal domestic social spending for the next seven years. The restrictions were only lifted when the Republican administration of Donald Trump wanted to cut taxes on the wealthy by $1.7 trillion while boosting military spending, and the Republican-controlled Congress enthusiastically obliged.

A federal default would affect the core interests of the financial oligarchy, since it would threaten the value of US Treasury bonds, the most important financial security in the world market and the expression of US global dominance. An earlier letter from Yellen to new House Speaker Kevin McCarthy warned that a default would threaten “global financial stability.”

This shock would come under conditions where the world financial system is particularly fragile. It faces runaway inflation and the prospect of multiple defaults among heavily indebted countries in Latin America, Africa and Asia, as well as the stresses induced by the ongoing pandemic, the US-NATO proxy war against Russia in Ukraine, and mounting tensions between the US and China, the first- and second-largest national economies. There is also the impact of financial manipulations such as the cryptocurrency market, exposed as a colossal fraud by the collapse of FTX.

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