WASHINGTON — Treasury Secretary Janet Yellen announced that the U.S. will soon need to employ “extraordinary measures,” specific accounting strategies aimed at preventing the nation from reaching its debt ceiling, as early as January 14. This announcement was communicated in a letter to congressional leaders on Friday.
Yellen indicated that the Treasury Department anticipates reaching the statutory debt ceiling between January 14 and January 23. At that time, the department will initiate extraordinary measures to avoid breaching the ceiling, which is currently suspended until January 1, 2025.
These extraordinary measures, previously utilized during similar situations, are essential for maintaining government operations. However, once these measures are exhausted, the U.S. could face a risk of default unless Congress and the President reach an agreement to raise the borrowing limit.
Yellen emphasized, “I respectfully urge Congress to act to protect the full faith and credit of the United States.”
This news comes shortly after President Biden signed a bill that prevented a government shutdown but did not meet former President Trump’s demand to raise or suspend the nation’s debt limit. The bill was passed amid significant debate among Republicans on addressing Trump’s request. Trump criticized the situation, stating that any outcome other than raising the limit would be a “betrayal of our country.”
After prolonged discussions throughout the summer of 2023 regarding government funding, policymakers created the Fiscal Responsibility Act, which enforced a suspension on the nation’s $31.4 trillion borrowing authority until January 1, 2025.
Yellen also pointed out that on January 2, the debt is expected to temporarily reduce due to a scheduled redemption of nonmarketable securities tied to Medicare payments. Consequently, she noted that “Treasury does not expect it will be necessary to start taking extraordinary measures on January 2 to prevent the United States from defaulting on its obligations.”
The current federal debt hovers around $36 trillion, a figure that has increased under both Republican and Democratic administrations. The surge in inflation following the pandemic has escalated government borrowing costs, leading to anticipated debt servicing that will surpass national security expenditures next year.
As Republicans prepare to take full control of the White House, House, and Senate in the upcoming year, they have outlined plans to extend Trump’s 2017 tax cuts, alongside other fiscal priorities, but will face significant discussions regarding funding sources.
