U.S. Implements Special Measures as Debt Ceiling Nears... "Default Possible in June"

Secretary Yellen: "Suspension of Civil Service Fund Payments from the 21st,

Debt Ceiling Reached Between 14th and 23rd of This Month"

Urges Congress to Raise or Suspend Debt Ceiling

National Debt Ratio Expected to Reach Record High in 10 Years

As the U.S. national debt is expected to reach its legal limit, special measures to prevent a default are anticipated to be implemented starting on the 21st (local time).

Janet Yellen, the U.S. Treasury Secretary, stated in a letter to the leaders of the House and Senate on the 17th that "it was anticipated in a letter last month that the debt ceiling would be reached between the 14th and 23rd," and "the Treasury will implement special measures starting on the 21st."

Special measures refer to the temporary suspension of payments to two civil service funds to avoid exceeding the debt ceiling set by Congress. The Treasury plans to initially suspend new payments to the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund until March 14th. Secretary Yellen said, "It is uncertain how long these measures will last," and urged Congress to raise or suspend the debt ceiling to protect the credit of the United States.

If Congress does not raise, suspend, or abolish the debt ceiling by the so-called 'X date' when the government's special measures end, the U.S. government will fall into a state of default. The Economic Policy Innovation Center, a conservative think tank in the U.S., expects the X date to be around mid-June.

Last year, there was ongoing conflict between the Joe Biden administration and the Republican Party over raising the debt ceiling. This was due to Donald Trump, the U.S. President-elect, strongly demanding the abolition of the debt ceiling. A massive amount of resources is needed to implement Trump's pledged large-scale tax cuts and the completion of the border wall. Due to internal Republican opposition, this demand was excluded from this year's budget, and the debt ceiling was raised by $1.5 trillion.

The Congressional Budget Office (CBO) projected that the national debt would increase by $21.1 trillion over the next 10 years. This would bring the national debt to 118% of the U.S. Gross Domestic Product (GDP), the highest level ever. The CBO expects a budget deficit of $1.9 trillion in the current fiscal year alone. The U.S. national debt is currently estimated to reach $36.2 trillion.

Reporter Da-yeon Lim allopen@hankyung.com