US Treasury takes 'extraordinary' frantic steps to avoid looming default

US Treasury Secretary Janet Yellen has sounded the alarm on the possibility of the United States defaulting on its national debt as lawmakers grapple with a fast-approaching breach of the debt limit.

The United States Department of the Treasury began taking frantic measures on Thursday to prevent a default on government debt, AFP reported.

Yellen has said the United States will likely hit the $31.4 trillion statutory debt limit on January 19. She pledged to take “extraordinary measures” to fend off the default.

The US Treasury, however, has warned that the “extraordinary measures” would only help for a limited time.

"I respectfully urge Congress to act promptly to protect the full faith and credit of the United States," Yellen said in a letter to Congressional leadership on Thursday.

She added that there is "considerable uncertainty" on how long the measures can last before risking default.

"Failure to meet the government's obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability," Yellen warned last week.

JPMorgan Chase Chief Executive Jamie Dimon also said Thursday that "we should never question the creditworthiness of the United States government."

"That is sacrosanct. It should never happen," he told CNBC.

The debt limit issue has set the table for a showdown between the White House, Democrats in the Senate and a Republican-controlled House.

Far-right Republicans want Democratic President Joe Biden to agree to slash government spending. They argue that radical cuts are needed to reduce borrowing.

"Unchecked spending will have dire consequences," said Republican House Ways and Means Committee Chairman Jason Smith in a statement.

"Congress cannot continue mortgaging our children and grandchildren's futures to borrow from foreign nations like China," Smith added.

Democrats want to quickly pass debt limit legislation, but House Republicans are adamant that they will not cooperate without major spending cuts.

“The Republicans were largely elected to get control of reckless spending,” US Congressman Don Bacon (R-Neb.) said this weekend. “On our side we have to realize… we can’t get everything we want either. I want our side to negotiate with the Democrats in good faith.”

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US House Republicans have reportedly put together a plan on what the Treasury should do if the United States does come up against its debt limit.

They threatened to use the debt ceiling as leverage to demand spending cuts from Democrats and the Biden administration.

Democrats have pressured Republicans to negotiate quickly to avoid a “disastrous” default on the national debt.

Yellen has also called on lawmakers to act quickly to raise the debt ceiling to "protect the full faith and credit" of the United States.

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