Janet Yellen tells Congress that US could reach debt ceiling in mid-January

Treasury Secretary Janet Yellen said in a letter sent to congressional leaders Friday afternoon that her agency will need to begin taking “extraordinary measures” or special accounting maneuvers designed to keep the country from reaching the debt ceiling. from January 14.

“Treasury expects to reach the statutory debt ceiling between January 14 and 23,” Yellen wrote in a letter to House and Senate leaders, at which point extraordinary measures would be used to prevent the government to exceed the country's debt ceiling – which it did. was suspended until January 1, 2025.

The department has in the past deployed what are called “extraordinary measures” or accounting maneuvers to keep the government functioning. But once those measures expire, the government risks being unable to repay its debt unless lawmakers and the president agree to lift the limit on the U.S. government's borrowing capacity.

“I respectfully urge Congress to act to protect the full faith and credit of the United States,” she said.

The news comes after President Biden signed a bill last week that averts a government shutdown but does not include President-elect Donald Trump's request for basic debt to increase or suspend the limit debt of the country. The bill was approved by Congress only after a fierce internal debate among Republicans over how to meet Trump's request. “Anything else is a betrayal of our country,” Trump said in a statement.

After a lengthy debate during the summer of 2023 over how to finance the government, policymakers crafted the Fiscal Responsibility Act, which called for suspending the country's borrowing authority of $31.4 trillion until as of January 1, 2025.

However, Yellen said, on Jan. 2, the debt is expected to decline temporarily due to a scheduled buyback of nonmarketable securities held by a federal trust fund associated with Medicare payments. As a result, “Treasury does not expect it will be necessary to begin taking extraordinary measures on January 2 to prevent the United States from defaulting on its obligations,” she said.

The federal debt currently stands at about $36 trillion – a figure that has exploded in both Republican and Democratic administrations. And soaring inflation after the coronavirus pandemic has driven up government borrowing costs, so that debt service next year will exceed national security spending.

Republicans, who will have full control of the White House, House and Senate in the new year, have big plans to extend Trump's 2017 tax cuts and other priorities, but are debating on how to finance them.

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