Treasury Secretary Janet Yellen issued a stark warning to Congress on Friday, cautioning that the U.S. government will need to begin taking "extraordinary measures" as early as January 14 if lawmakers do not act to raise or suspend the debt ceiling. Her statement underscores the growing urgency surrounding the nation's borrowing limit, with the risk of default looming large.
In a letter addressed to House Speaker Mike Johnson and other congressional leaders, Yellen detailed the Treasury's expectations for reaching the statutory debt limit, which has been suspended since the Fiscal Responsibility Act of 2023. That law set January 1, 2025, as the suspension's expiration date, but Yellen noted that the Treasury anticipates hitting the limit within weeks.
"I respectfully urge Congress to act to protect the full faith and credit of the United States," Yellen wrote. She emphasized the critical importance of avoiding a government default, which could send shockwaves through global financial markets and jeopardize essential services, including Social Security and Medicare.
The debt ceiling, which caps the amount the U.S. government can borrow, was last suspended as part of the bipartisan agreement crafted in 2023. The Fiscal Responsibility Act temporarily alleviated concerns about the nation's $31.4 trillion borrowing authority. However, the federal debt has since climbed to approximately $36 trillion, driven by pandemic-related spending and rising interest rates.
Yellen's warning comes just weeks after President Joe Biden signed a short-term funding bill to avert a government shutdown. Notably, that legislation did not address the debt ceiling, leaving unresolved a key demand from President-elect Donald Trump. Trump, who has called for eliminating the debt limit altogether, criticized Congress for not including such provisions, stating, "Anything else is a betrayal of our country."
The Treasury Secretary outlined the department's plans to employ extraordinary measures-special accounting maneuvers-to keep the government operational after the ceiling is reached. These measures include suspending investments in certain federal retirement and disability funds. While such actions have been used in the past to buy time, they are a temporary solution and cannot prevent default indefinitely.
Adding complexity to the situation is a projected temporary decrease in the federal debt on January 2, resulting from a scheduled redemption of non-marketable securities tied to Medicare payments. Yellen clarified that this adjustment would delay the need for extraordinary measures by a few days but warned that the reprieve would be short-lived.
The impending crisis has rekindled debates over fiscal responsibility and political priorities. Republicans, who will assume unified control of the White House and Congress in January, have ambitious plans to extend Trump's 2017 tax cuts and pursue other policy objectives. However, the question of how to finance these initiatives amid soaring debt remains unresolved.
The issue of the debt ceiling has long been a political flashpoint. While some GOP lawmakers have historically opposed raising the limit under Democratic administrations, Trump has voiced support for abolishing it entirely. Such a move would require bipartisan agreement, a challenging prospect given the current political climate.
