WASHINGTON (Reuters) – The U.S. government will have to stop borrowing money between July and December if Washington doesn’t agree to raise a legal restriction on public debt, the Treasury Department said on Wednesday.
Hitting that so-called “debt ceiling” could trigger a U.S. default on its debt and an immediate recession, a risk that has become a regular facet of U.S. politics over the last decade.
The current debt limit was set in March. Treasury has been able to continue borrowing from investors by using accounting measures such as limiting government payments to public sector retirement funds.
“Treasury expects that the extraordinary measures will be exhausted sometime in the second half of 2019,” Treasury Deputy Assistant Secretary Brian Smith said in a statement.
The debt ceiling is already affecting how the government funds itself. Issuance of Treasury bills – short-term debt – is expected to gradually decline over the second quarter due to debt ceiling constraints, Smith said.
Treasury said it was holding issuance size steady for auctions of debt coupons during the third quarter and that it anticipates no changes in the following three-month period either.
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