The federal government will hit its debt limit one day after President-elect Donald Trump’s inauguration – at which point “extraordinary measures” will be taken to keep the US from defaulting on its obligations, Treasury Secretary Janet Yellen informed congressional leaders Friday.
“This letter serves to notify you, pursuant to 5 U.S.C. § 8348(l)(2), of the extraordinary measures that Treasury will begin using on January 21,” Yellen wrote in a letter to the leaders of the House and Senate.
Yellen, 78, previously warned lawmakers that the government would reach its debt ceiling — the total amount of money the federal government is authorized to borrow to pay for obligations such as Social Security and Medicare benefits — between Jan. 14-23, and that legislative action would be needed to stave off “extraordinary measures” and allow the government to continue paying its bills.
In her latest letter, the Biden administration official outlined two out of the ordinary steps the Treasury Department will take soon after Trump is sworn in as the 47th president.
“First, I have determined that, by reason of the statutory debt limit, I will be unable to fully invest the portion of the Civil Service Retirement and Disability Fund (CSRDF) not immediately required to pay beneficiaries, and that a ‘debt issuance suspension period’ will begin on Tuesday, January 21, 2025, and last through Friday, March 14, 2025,” Yellen wrote.
The former chairwoman of the Federal Reserve noted that debt issuance suspensions have been declared in the past by the Treasury Department “under similar circumstances.”
“In addition, because the Postal Accountability and Enhancement Act of 2006 provides that investments in the Postal Service Retiree Health Benefits Fund (PSRHBF) shall be made in the same manner as investments for the CSRDF, the Treasury Department will suspend additional investments of amounts credited to the PSRHBF,” Yellen continued.
She asserted both funds would “be made whole once the debt limit is increased or suspended.”
“Federal retirees and employees will be unaffected by these actions,” Yellen wrote. .
The national borrowing limit had been dormant between June 2023 and Jan. 1 as a result of the passage of the Fiscal Responsibility Act of 2023, which was negotiated by President Biden and former House Speaker Kevin McCarthy (R-Calif.).
Hard-line members of the Republican caucus staunchly opposed that successful effort to suspend the debt limit.
Trump, meanwhile, has already signaled his support for abolishing the debt ceiling altogether.
Eliminating the nation’s debt limit would be the “smartest thing [Congress] could do. I would support that entirely,” the incoming president told NBC News last month.
“The Democrats have said they want to get rid of it. If they want to get rid of it, I would lead the charge. It doesn’t mean anything, except psychologically,” Trump argued.
His proposal received support from some of his most vocal political rivals, including Sen. Elizabeth Warren (D-Mass.).
“I agree with President-elect Trump that Congress should terminate the debt limit and never again govern by hostage taking,” Warren wrote on X.
Trump, 78, had unsuccessfully pushed lawmakers last month to include a provision to lift or abolish the debt limit as part of legislation to keep the government funded.
Yellen could not say how long “extraordinary measures” would remain in effect and urged congressional lawmakers to address the debt ceiling issue.
“The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. Government months into the future,” she wrote. “The debt limit does not authorize new spending, but it creates a risk that the federal government might not be able to finance its existing legal obligations that Congresses and Presidents of both parties have made in the past.”
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” Yellen added.
The national debt currently exceeds $36 trillion — an increase of about $5 trillion from where it stood at the time of the 2023 debt ceiling battle.
