Treasury Secretary Janet Yellen has warned Congress that the US government may soon need to employ “extraordinary measures” to prevent a default on its financial obligations.
Secretary Yellen stated that the federal government is projected to reach its debt limit as early as January 14th unless Congress intervenes or the Treasury Department implements exceptional financial maneuvers. The debt ceiling, a limit on the amount the US government can borrow, was suspended until January 1, 2025, under a 2023 budget agreement. Without further Congressional action, the Treasury will be unable to fulfill all its financial commitments.
In a letter to Congress on Friday, Yellen indicated that the Treasury anticipates reaching the debt limit between January 14th and January 23rd, necessitating the use of these special accounting techniques. She noted that the US national debt, currently approximately $36 trillion, is expected to decrease by about $54 billion on January 2nd due to a scheduled repayment of nonmarketable securities held by a federal trust fund related to Medicare.
While the government can typically operate for several months using these “extraordinary measures,” their depletion would risk a default unless Congress and the President agree to raise the borrowing limit. Yellen urged lawmakers to act swiftly to maintain the US’s creditworthiness.
Yellen’s warning follows President Biden’s signing of a funding bill last week that prevented a government shutdown. This bill funds the government through March 14th, including $100 billion in disaster relief, but does not extend the debt ceiling, a point of contention with President-elect Trump.
Biden described the funding agreement as a compromise, acknowledging that neither party achieved all of its objectives. President-elect Trump has voiced support for eliminating the debt ceiling entirely, asserting it would be a beneficial policy decision.
It’s worth noting that Congress successfully suspended the debt limit in June 2023 after extensive negotiations, thus avoiding a potential national default.