Treasury Takes Steps To Avoid Federal Borrowing Limit

The Treasury Department under Janet Yellen on Monday started action to avoid topping the federal borrowing limit after the debt ceiling suspension expired at the end of July.

The move will let the Treasury pay bills incurred by the government without creating new debt for up to three months. Traditionally, the limit keeps the Treasury issuing new bonds to fund the government once a certain limit, which was $22 trillion in 2019, is hit.

The Congressional Budget Office said in July the new limit could top $28.5 trillion.

"The CBO projects that if the debt limit is not raised, the Treasury would probably run out of cash and be unable to make its usual payments starting sometime in the first quarter of the next fiscal year, most likely in October or November," the Congressional Budget Office said in a statement July 21.

While the United States has never defaulted on payments, Republicans made the debt ceiling a political issue during the Obama administration, attempting to use it as a wedge to get rid of the Affordable Care Act. Republicans went silent on debt ceiling issues during the Trump administration.

To escape of possible renewal of the subject by Republicans, Democrats are considering either making raising the debt ceiling part of its larger infrastructure package that would have to be passed through a reconciliation measure or addressing it as a stand-alone bill using the same method.