Treasury Secretary Janet Yellen warned congressional leaders Friday that the federal authorities will hit its debt limit as early as Jan. 14 until Congress takes motion or her division implements “extraordinary measures” to keep away from default.
Yellen’s letter signifies that the looming debt ceiling struggle involving Congress and the brand new administration is prone to happen within the early months of subsequent 12 months after President-elect Donald Trump did not get a provision elevating or eliminating the debt ceiling tacked on to an end-of-year spending bill.
“Treasury at the moment expects to succeed in the brand new restrict between January 14 and January 23, at which era will probably be mandatory for Treasury to start out taking extraordinary measures,” Yellen wrote in her letter, addressed to House Speaker Mike Johnson, R-La.
“I respectfully urge Congress to behave to guard the total religion and credit score of the United States,” Yellen added.
The dates Yellen cited might shift down the road, pushing the deadline additional into 2025. The federal authorities can usually function for months below the “extraordinary measures” or accounting maneuvers Yellen referenced in her letter.
The debt ceiling, or the whole amount of cash the federal government can borrow to satisfy its fiscal obligations, is suspended till Jan. 1, following passage of the Fiscal Responsibility Act of 2023 that was signed into legislation by President Joe Biden.
Once the U.S. hits the debt ceiling, the federal government can’t borrow any more cash and technically defaults, leaving it unable to pay payments until the president and Congress negotiate a method to elevate a restrict on the flexibility to borrow.
As the federal government confronted an ultimately averted shutdown final week, one of many points Congress debated was rising and even eliminating the debt ceiling.
The federal debt stands at roughly $36 trillion.
Democrats have lengthy argued for elevating or eliminating the restrict — a transfer historically opposed by Republicans, who’ve cited the rising debt in negotiations with Democrats as they argue that federal spending is just too excessive.
However, Trump appeared to take up the Democratic argument for the primary time this month, telling NBC News that he thought the debt ceiling ought to be abolished.
“The Democrats have mentioned they wish to eliminate it. If they wish to eliminate it, I might lead the cost,” Trump mentioned.
He unsuccessfully demanded that Congress embody a provision to increase or abolish the debt ceiling in its end-of-year funding invoice, threatening electoral main challenges in opposition to Republicans who voted to fund the federal government whereas excluding a debt restrict.
Ultimately, 170 Republicans defied him and added the debt ceiling struggle to the incoming administration’s growing to-do list.
