Extraordinary Measures

Extraordinary Measures

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On a number of recent occasions, the U.S. government has bumped up against its debt limit. During these times, additional debt could not be issued using normal operations. The Treasury Department used extraordinary measures that generate additional cash to meet financial obligations while still complying with the debt limit.

2. Exchange Stabilization Fund (ESF)This measure works similarly to the G Fund. The ESF is an account that Treasury uses for certain currency-related operations. It is composed of the same securities as the G Fund (one-day certificates). The ESF is much smaller than the G Fund and is often only deployed as an extraordinary measure after the G Fund has been fully depleted of securities.

All of these measures are authorized by law and have conditions on when and how they are used, along with how they must be unwound after the debt limit is increased or suspended. Only Congress has the authority to pass legislation to add new measures or change existing measures.

Republicans say fiscal reforms are critical while pointing to the growth in debt seen in recent years, particularly during the coronavirus pandemic, and the strain of high inflation. But Republicans have also pushed back on proposals by Democrats to tackle the deficit through tax measures targeting wealthier individuals and corporations.

The Treasury is currently at its limit on borrowing and has begun employing its well-established toolbox of measures to allow continued borrowing for a limited time. When will those measures be exhausted?

Because the No Budget, No Pay Act provided no additional borrowing authority above the amount of debt that had already been issued as of May 18, the Treasury has no room under the newly established limit to increase total borrowing. Therefore, to avoid a breach of that limit, the Treasury has begun employing its well-established toolbox of so-called extraordinary measures to allow continued borrowing for a limited time. As it reported in May, CBO projects that those measures will be exhausted in either October or November of this year.

Those measures provide the Treasury with additional room to borrow by limiting the amount of debt held by the public or debt held by government accounts that would otherwise be outstanding. By statute, both the Civil Service and Postal Service funds, as well as the G Fund, will eventually be made whole (with interest) after the debt limit has been raised.

In the coming months, the Treasury will employ its full arsenal of extraordinary measures to stay under the current debt limit. If a new debt limit is not agreed upon, CBO expects those measures to run out sometime in October or November of this year.

Economists say those so-called extraordinary measures will allow Treasury to pay off the government's bills without floating new debt for two to three months. After that, Congress will need to either raise or suspend the borrowing limit or risk the U.S. defaulting on its obligations.

The Treasury Department notified Congress on Monday afternoon to confirm that it's begun the emergency measures. Treasury Secretary Janet Yellen explained to House Speaker Nancy Pelosi, D-Calif., that her department will halt regular payments to a variety of retirement funds.

Previously, Yellen impressed upon Pelosi that trillions in federal spending and Covid relief laws have made it more difficult to say how long Treasury will be able to sustain its extraordinary measures.

The extraordinary measures allow the Treasury to redeem certain investments in federal pension programs and halt new ones in order to generate cash without raising the overall debt. But when those methods are exhausted, there is no backstop.

Secretaries of the Treasury in both Republican and Democratic administrations have used their authority to take certain extraordinary measures in order to prevent the United States from defaulting on its obligations as Congress deliberated on increasing the statutory debt limit. Four of these extraordinary measures are available at this time. The other measures that have been taken in the past are either unavailable or of limited use.

These extraordinary measures, all of which have been employed during previous debt limit impasses, have the effect of creating or conserving headroom beneath the debt limit. These measures are limited and therefore can postpone only briefly the need for an increase in the statutory debt limit. On average, the public debt of the United States is increasing by approximately $100 billion per month (although there are significant variations from month to month). In total, the extraordinary measures currently available free up approximately $200 billion in headroom under the limit, as described below.

During a debt issuance suspension period, civil service benefit payments would continue to be made as long as the United States has not yet exhausted the extraordinary measures. Once the extraordinary measures have been exhausted, however, the U.S. Government will be limited in its ability to make payments across the government. After the debt limit impasse has ended, the statute provides that the CSRDF is to be made whole.2 Therefore employees and retirees are unaffected by these actions.

During the period of the investment suspension, payments from the G Fund continue to be made as long as the United States has not yet exhausted the extraordinary measures. Once the United States has exhausted the extraordinary measures, however, the U.S. Government will be limited in its ability to make payments across the government. After the debt limit impasse has ended, the G Fund is made whole.5 Therefore participants in the Thrift Savings Plan who contribute to the G Fund are unaffected by the actions described above.

First, although in the past Treasury Secretaries have suspended the issuance of U.S. savings bonds to the public, doing so now would be of little benefit. Suspending the issuance of U.S. savings bonds would not free up any headroom under the debt limit. As is the case with suspending sales of SLGS, suspending the sales of savings bonds would only eliminate increases in debt that would count against the debt limit if the securities were issued. Moreover, suspending such sales conserves very little headroom.6 Second, measures relating to the Federal Financing Bank (FFB) are of limited use.7 Third, a measure previously used, involving the calling in of cash that Treasury kept on deposit at banks, is no longer available: Treasury no longer keeps these balances.8 Finally, Congress has in the past provided one-time tools in the midst of a debt limit impasse;9 those authorities expired nearly 17 years ago.

The U.S. government bumped up against that limit last Thursday, prompting the Treasury Department to initiate a series of actions that are known as "extraordinary" measures and are intended to stave off a default. Yellen did not provide any further clarity on how long the measures can be used to avoid the Treasury running out of cash; earlier this month, she projected the measures will keep the government funded until at least early June.

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The U.S. Capitol Building is seen on Jan. 19, 2023, in Washington, D.C. Treasury Secretary Janet Yellen said the U.S. reached its debt limit on Thursday and is resorting to extraordinary measures to avoid defaulting on its debt. Anna Moneymaker/Getty Images hide caption

Treasury Secretary Janet Yellen, in a letter to Congress on Thursday, said the U.S. has reached its debt limit, and has begun resorting to "extraordinary measures" so the government can continue paying its bills.

Analysts had previously estimated the debt limit could be reached as early as June with the measures Treasury has taken, but there's considerable uncertainty of exactly when that will happen, as Yellen herself noted on Thursday.

"The period of time that extraordinary measures may last is subject to considerable uncertainty," Yellen wrote. "I respectfully urge Congress to act promptly to protect the full faith and credit of the United States."

And so, we cannot simply do more of the same. Extraordinary times call for extraordinary measures. Our challenge is not to save any particular organization; it is to save the soul of our democracy itself.

In a letter to congressional leadership on Thursday, Treasury Secretary Janet Yellen said the agency will begin taking "extraordinary measures" to temporarily keep the government under the borrowing limit of $31.4 trillion after hitting the debt ceiling.

This is a global health crisis, and the extraordinary circumstances of the COVID-19 pandemic call for extraordinary measures. The Administration believes strongly in intellectual property protections, but in service of ending this pandemic, supports the waiver of those protections for COVID-19 vaccines. We will actively participate in text-based negotiations at the World Trade Organization (WTO) needed to make that happen. Those negotiations will take time given the consensus-based nature of the institution and the complexity of the issues involved. 781b155fdc