Treasury Secretary Janet Yellen said the US has reached its debt ceiling and the US Treasury is taking emergency action to keep the superpower’s public services running.

In a letter to Speaker of the House Kevin McCarthy, the Treasury Secretary said her department would suspend any new investment in the Public Employees’ Retirement and Disability Fund and the Postal Service Pension and Insurance Fund until June 5. However, he warned that the move would come with “extreme uncertainty” unless Congress passes a bill to raise the debt ceiling, which currently sits at $31.4 trillion. dollars. On Friday, the Treasury secretary told senators that emergency measures would allow the government to fulfill its obligations by early June. Last week, Yellen urged Congress to act quickly to raise or suspend the debt ceiling. As he warned, otherwise it could lead to the first default in US history with economic consequences for the whole world. The White House also urged Congress to raise the debt limit “without strings attached.”

The US government has not defaulted on its debt payments, but according to government data, the debt ceiling has risen more than 22 times from 1997 to 2022. The Joe Biden administration will prioritize negotiations on a new bill that will pave the way for raising the debt ceiling after the mid-April tax deadline, a White House official said.

But Republicans are using their narrow House majority and debt ceiling pressure to cut spending on government programs. They argue that the US Treasury can avoid default by prioritizing US debt repayments. This is an ongoing argument that has been used in previous related skirmishes between the two parties in the US Congress over the superpower’s borrowing limit. However, the White House rejects this idea without discussion. “There will be no negotiations on the borrowing limit,” said White House Deputy Press Secretary Olivia Dalton and urged Congress to resolve the problem immediately and unconditionally, “as has already been done three times when Donald Trump was a Republican President.”

The Biden administration will prioritize negotiations on a new bill that will pave the way for raising the debt limit to $31.4 trillion. dollars.

More broadly, Republican maneuvers in the House of Representatives raised concerns that it would be difficult for Congress to raise the national debt ceiling before June. Republican senators said they prefer to cut spending as part of a deal to increase the borrowing limit.

Some Republicans said the massive spending cuts on key government programs such as Medicare and Social Security were part of the negotiations that helped win McCarthy hardliners’ support and win the Speaker of the House. McCarthy called for spending cuts to prevent the aforementioned health and welfare programs from collapsing.

For its part, Moody’s indicated that the US Congress is likely to reach an agreement on a new debt limit before the Treasury exhausts emergency measures to avoid a default. However, Moody’s expects the deal to be completed “with a long delay or in stages”, which will lead to more volatility in financial markets. Despite warnings from the credit rating agency and calls from the Treasury Secretary, neither President Biden’s Republicans nor Democrats show any inclination to back down.

The bipartisan standoff over the US debt ceiling has once again left both the Biden administration and Wall Street worried that it will cause as much trouble as it did in 2011. Then the tug-of-war between Republicans and Democrats led to an unimaginable credit downgrade. US credit rating, and then cutting defense spending and domestic policy for a long time.