WASHINGTON – In a letter sent to congressional leaders Friday afternoon, Treasury Secretary Janet Yellen stated that her agency will need to begin taking “extraordinary measures,” or special accounting maneuvers, to prevent the country from exceeding its debt ceiling as early as January 14.
“Treasury expects to hit the statutory debt ceiling between January 14 and January 23,” Yellen wrote in a letter to House and Senate leadership, at which point extraordinary measures would be used to keep the government from exceeding the nation’s debt ceiling, which has been suspended until January 1, 2025.
The department has previously used “extraordinary measures” or accounting maneuvers to keep the government running. However, once these measures expire, the government risks defaulting on its debt unless lawmakers and the president agree to raise the borrowing limit.
“I respectfully urge Congress to act to protect the full faith and credit of the United States,” she told reporters.
The announcement comes after President Joe Biden signed a bill into law last week that avoided a government shutdown but did not include President-elect Donald Trump’s primary debt demand to raise or suspend the nation’s debt limit.
Congress approved the bill only after a heated internal debate among Republicans over how to handle Trump’s request. “Anything else is a betrayal of our country,” Trump declared in a statement.
Following a protracted debate over how to fund the government in the summer of 2023, policymakers enacted the Fiscal Responsibility Act, which suspended the country’s $31.4 trillion borrowing authority until January 1, 2025.
Notably, Yellen stated that on January 2, the debt is expected to decrease temporarily due to the redemption of nonmarketable securities held by a federal trust fund associated with Medicare payments. In response, “Treasury does not expect that it will be necessary to start taking extraordinary measures on January 2 to prevent the United States from defaulting on its obligations,” according to her statement.
The federal debt is currently around $36 trillion, having ballooned under both Republican and Democratic administrations. Inflationary pressures following the coronavirus pandemic have increased government borrowing costs to the point where debt service will exceed national security spending next year.
Republicans, who will have complete control of the White House, House, and Senate in the new year, have ambitious plans to extend Trump’s 2017 tax cuts and other priorities, but they disagree on how to pay for them.