Treasury Secretary Steve Mnuchin said in a letter to leaders in Congress on Monday that the federal government has taken another one of its “extraordinary measures” to avoid hitting the debt ceiling by stopping investment into two retirement funds for federal employees.
The two funds are the Civil Service Retirement and Disability Fund (CSRDF) and the Postal Service Retiree Health Benefits Fund. Mnuchin said the government can no longer fully invest in these funds as a way to avoid exceeding the debt ceiling. He noted, however, that once the debt limit is raised, the funds will be made whole again, much along the lines of what is done with the TSP’s G Fund.
The Congressional Budget Office warned in a recent report that the Treasury Department would likely have to soon begin using these “extraordinary measures” to avoid hitting the debt ceiling.
About the CSRDF
The CSRDF provides defined benefits to retired and disabled Federal employees covered by the Civil Service Retirement System (CSRS).
This fund invests in special-issue Treasury securities, and these securities count against the debt limit.
The Treasury Department is authorized to suspend investing money received by the CSRDF. This authority can be used when the Secretary of the Treasury determines that additional investments cannot be made without exceeding the debt limit. Also, the Treasury can redeem existing investments held by the CSRDF when the Secretary of the Treasury determines a “debt issuance suspension period.”
The Debt Ceiling
The federal government is facing the spending restraint thanks to a new debt limit that was imposed starting last Friday.
Congress had suspended the debt ceiling in September, thereby allowing the government to borrow as much money as it wanted, but when this suspension ended Friday, it imposed a new debt ceiling of roughly $20.493 trillion. It will now have to be raised by Congress again to let the federal government to continue borrowing money at its usual pace.
The CBO also said in its recent report that the federal government should be able to operate via the use of these “extraordinary measures” until March or April, but that the government would start to run out of money at that point if the debt ceiling isn’t raised.
Mnuchin urged Congress in his letter to raise the debt ceiling as soon as possible.