Treasury Secretary Janet Yellen has informed congressional leaders that the Treasury Department will need to implement 'extraordinary measures' starting as early as January 14 to prevent the nation from reaching the debt ceiling. Yellen stated that the statutory debt ceiling is expected to be reached between January 14 and January 23, prompting the use of these special accounting maneuvers to avoid breaching the debt limit, which has been suspended until Jan. 1, 2025.
Historically, the Treasury has utilized extraordinary measures to keep the government functioning when faced with reaching the debt ceiling. However, once these measures are exhausted, there is a risk of default unless lawmakers and the president agree to raise the borrowing limit.
Yellen urged Congress to take action to safeguard the full faith and credit of the United States. This development follows President Joe Biden signing a bill into law that prevented a government shutdown but did not address former President Donald Trump's insistence on raising or suspending the debt limit.
The Fiscal Responsibility Act, passed after a contentious debate in the summer of 2023, suspended the nation's borrowing authority until Jan. 1, 2025. Yellen noted that on Jan. 2, a temporary decrease in debt is projected due to the redemption of nonmarketable securities held by a federal trust fund linked to Medicare payments, eliminating the immediate need for extraordinary measures.
The current federal debt stands at approximately $36 trillion, a figure that has grown under both Republican and Democratic administrations. The surge in inflation post-pandemic has raised government borrowing costs, with debt service projected to surpass national security spending next year.
With Republicans set to control the White House, House, and Senate in the upcoming year, discussions are underway regarding plans to extend Trump's 2017 tax cuts and other priorities, with the challenge of determining how to finance these initiatives.
