Janet Yellen warns of ‘extraordinary measures’ needed to avoid default in January

Treasury Secretary Janet Yellen warned congressional leaders on Friday that the federal government will hit its debt limit as early as January 14 unless Congress takes action or her department implements “extraordinary measures” to avoid default.

Yellen’s letter indicates that the looming debt ceiling battle involving Congress and the new administration is likely to take place in the early months of next year after President-elect Donald Trump failed to get a provision raising or eliminating the debt ceiling , put to an end. expense account for the year.

“Treasury currently expects to reach the new limit between January 14 and January 23, at which point it will be necessary for the Treasury Department to begin taking extraordinary measures,” Yellen wrote in her letter, addressed to House Speaker Mike Johnson, R- La.

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

The dates Yellen cited could move down the line, pushing the deadline further into 2025. The federal government can often operate for months under the “extraordinary measures” or fiscal maneuvers Yellen referred to in her letter.

The debt ceiling, or the total amount the government can borrow to meet its fiscal obligations, is suspended until Jan. 1 following the passage of the Fiscal Responsibility Act of 2023, which was signed into law by President Joe Biden.

Once the US hits the debt ceiling, the government cannot borrow any more money and is technically in default, leaving it unable to pay bills unless the president and Congress negotiate a way to lift a limit on the ability to borrow.

As the government faced an ultimately averted shutdown last week, one of the issues Congress debated was raising or even eliminating the debt ceiling.

The federal debt is about $36 trillion.

Democrats have long argued for raising or eliminating the limit — a move traditionally opposed by Republicans, who have cited the growing debt in talks with Democrats as they argue federal spending is too high.

However, Trump appeared to take up the Democratic argument for the first time this month, telling NBC News that he believed the debt ceiling should be abolished.

“The Democrats have said they want to get rid of it. If they want to get rid of it, I would lead the charge,” Trump said.

He unsuccessfully demanded that Congress include a provision to extend or eliminate the debt ceiling in its funding bill by the end of the year, threatening primary challenges against Republicans who voted to fund the government while ruling out a debt limit.

In the end, 170 Republicans defied him and added the debt ceiling fight to the incoming administration’s growing to-do list.