Treasury Secretary Janet Yellen has warned Congress that the nation may hit the debt ceiling as early as January 14, prompting the need for special accounting maneuvers. Yellen stated that the Treasury is expected to reach the debt ceiling between January 14 and January 23, at which point extraordinary measures will be utilized to prevent the government from defaulting. These measures have been used in the past to keep the government operating, but failure to lift the debt limit could result in a default on the nation’s debt. Yellen urged Congress to act to protect the United States’ full faith and credit.
The news comes after President Joe Biden signed a bill into law that averted a government shutdown but did not address President Trump’s demand to raise or suspend the nation’s debt limit. The bill was passed after intense debate among Republicans on how to handle Trump’s demands. Trump criticized any action other than raising the debt limit as a betrayal of the country. The Fiscal Responsibility Act, which suspended the nation’s borrowing authority until 2025, was crafted after a lengthy debate in the summer of 2023 on government funding.
Despite the impending debt ceiling issue, Yellen mentioned that on January 2, the debt is projected to decrease due to a scheduled redemption of nonmarketable securities linked to Medicare payments. This temporary decrease in debt means that extraordinary measures may not be necessary on January 2 to prevent a default. The federal debt currently stands at around $36 trillion, a figure that has grown across multiple administrations. Inflation following the pandemic has led to higher government borrowing costs, with debt service projected to surpass national security spending next year.
With Republicans set to have control over the White House, House, and Senate in the new year, there are discussions on extending Trump’s tax cuts and other priorities. However, there is a debate on how to pay for these plans, given the high levels of federal debt. The use of extraordinary measures to prevent a debt default highlights the need for bipartisan cooperation and measures to address the growing debt. It remains to be seen how Congress will respond to Yellen’s warning and whether they will take action to prevent a potential default on the nation’s debt.
