“Extraordinary measures” will be needed to keep the US from defaulting on its obligations if the nation’s debt ceiling isn’t raised or suspended by mid-January, Treasury Secretary Janet Yellen warned Congress Friday.
Yellen, in a letter to House and Senate leaders, noted that the nation’s 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 — was suspended in June 2023 but will once again be in effect on Jan. 1.
The 78-year-old Treasury secretary notified congressional leaders that a projected $54 billion drop in the national debt on Jan. 2 will potentially give lawmakers a few extra weeks to pursue legislative action before the government can no longer pay its bills under the new debt limit.
“Treasury currently expects to reach the new limit between January 14 and January 23, at which time it will be necessary for Treasury to start taking extraordinary measures,” Yellen wrote.
“I respectfully urge Congress to act to protect the full faith and credit of the United States,” she added.
Yellen’s warning will assuredly kickstart contentious negotiations on how to handle the debt ceiling days before the new Congress convenes on Jan. 3.
Republicans will hold slim majorities in both the House and the Senate next year, but hard-line members of the GOP caucus staunchly opposed last year’s successful effort to suspend the debt limit.
The so-called Fiscal Responsibility Act of 2023, negotiated by President Biden and former House Speaker Kevin McCarthy (R-Calif.) over Memorial Day weekend, passed the lower chamber in a 314-117 vote, with 71 Republicans joining 46 Democrats in opposing the measure.
The McCarthy-backed bill, which also limited non-defense discretionary spending to 1% annual growth and clawed back tens of billions of dollars in unspent COVID-19 relief funds, needed substantial Democratic support to pass.
Meanwhile, President-elect Donald Trump 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 week.
“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, pushed lawmakers last week to include a provision to lift or abolish the debt limit as part of legislation to keep the government funded.
The president-elect’s eleventh-hour suggestion was not included in the spending bill that cleared both chambers of Congress and was recently signed into law by Biden, 82.
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.
When the debt limit is reinstated next week, it will increase the amount of debt that has been incurred since it was suspended.
