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"Treasury expects to hit the statutory debt ceiling between
January 14 and January 23," Yellen wrote in a letter addressed
to House and Senate leadership, at which point extraordinary
measures would be used to prevent the government from breaching
the nation's debt ceiling — which has been suspended until Jan.
1, 2025.
The department has in the past deployed what are known as
“extraordinary measures” or accounting maneuvers to keep the
government operating. But once those measures run out the
government risks defaulting on its debt unless lawmakers and the
president agree to lift the limit on the U.S. government’s
ability to borrow.
"I respectfully urge Congress to act to protect the full faith
and credit of the United States," she said.
The news comes after President Joe Biden signed a bill into law
last week that averted a government shutdown but did not include
President-elect Donald Trump’s core debt demand to raise or
suspend the nation’s debt limit. The bill was approved by
Congress only after fierce internal debate among Republicans
over how to handle Trump's demand. “Anything else is a betrayal
of our country,” Trump said in a statement.
After a protracted debate in the summer of 2023 over how to fund
the government, policymakers crafted the Fiscal Responsibility
Act, which included suspending the nation's $31.4 trillion
borrowing authority until Jan. 1, 2025.
Notably however, Yellen said, on Jan. 2 the debt is projected to
temporarily decrease due to a scheduled redemption of
nonmarketable securities held by a federal trust fund associated
with Medicare payments. As a result, “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," she said.
The federal debt currently stands at roughly $36 trillion —
which ballooned across both Republican and Democratic
administrations. And the spike in inflation after the
coronavirus pandemic pushed up government borrowing costs such
that debt service next year will exceed spending on national
security.
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 debate over how
to pay for them.
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