It seems the U.S political setup might once again see the two party monoliths get at each other’s throat on the issue of the federal government once again reaching the legal debt limit starting Monday next week, after a suspension of the debt limit expires this Sunday.
With the history and experience of the past since the 1990s and especially since the year 2011, when the Congress saw an acrimonious debate between the Democrats and the Republicans is regarding the raising of the debt limits for the federal government, Treasury Secretary Jacob Lew sought to preempt the potential ‘brinkmanship’ that may play out in the Congress over the looming federal breach of the debt limit.
In a clear statement to the Congress, Lew warned the legislative body to not play politics over the country’s debt limits and its raising or trimming as it would hurt credit and investor sentiment for a lot of people and shake up faith in the dollar. This warning to the Congress came in the backdrop of a stop in the issuance of any debt by the Treasury ahead of Monday, when the last suspension of statutory borrowing ceiling will be lifted. Lew also added that the Treasury had been forced to take some ‘extraordinary measures’ to preempt the coming days before the March 16 return of the debt ceiling.
These measures include halting all new investments in federal employee pension funds, drawing down of a $23 billion currency stabilization fund and an imposition of a moratorium on deposits from state and local governments. After imposing such measures, Lew did not come out with any statement regarding how long these measures would be in force.
After Congress had approved a law to suspend U.S debt ceiling limits last year, the length of that suspension will end on March 16. As a result of the lifting of the suspension, the U.S. will face a debt limit of $18 trillion. Since 1917, the Congress has put a legal limit on how much the federal government can borrow from different sources to fund its many programs. However, due to the 2011’s brinkmanship between Democrats and the Republicans that put U.S. on the brink of debt default, the Congress adopted the drastic measure of suspending the law which placed a limit on U.S. federal debt.
Lew’s statements were made in the context of such a turbulent but recent history when the U.S. faced an imminent danger of losing investor faith and confidence. Hence Lew warned the Congress against making this a political bargaining chip in gaining one-upmanship over the other.