We reached the debt limit.

Yellen's letter to McCarthy is a good explainer of how the Treasury can extend the limit till roughly June. These two government retirement funds are supposed to be invested in special issue Treasury securities under current law, which would count against the debt limit. Instead that won't happen for this time period. And the Treasury will make early redemptions of the current investments which again will make room below the debt limit.

Government retirees won't be affected at all by these measures. These are just accounting maneuvers. At the end of the suspension period, both funds will be made whole as though the reinvestments actually occurred and as if the redemptions occurred on schedule. So it doesn't really functionally change anything for the funds.

There are a few more options available to the Treasury not mentioned here. However they are not as predictable as these measures, so it is less clear how long they would extend the time period.

June is a good conservative estimate of when the Treasury will exhaust these so-called extraordinary measures. It may be possible to extend beyond that time, but let's hope we don't have to test that possibility.

A default of course would be highly damaging. S&P downgraded the US during a past debt limit showdown, so it doesn't even have to get to that point for a potential downgrade to occur. At least this time we won't have a government shutdown as the prior Congress passed an appropriations bill.

We really shouldn't be having this political brinkmanship with the debt limit. These are existing debts of the government. They don't involve new government spending.