Janet Yellen expects the US to hit debt limit before the end of January
- Treasury Secretary Janet Yellen wrote a letter to House Speaker Mike Johnson Friday.
- In it, she warned that the US would breach its debt limit as soon as January 14 unless Congress acted.
- The Treasury Department will begin taking “extraordinary measures” to avoid defaulting on debt.
The US will need to take “extraordinary measures” to avoid defaulting on its debt as early as January 14, Treasury Secretary Janet Yellen warned in a letter on Friday.
In the letter addressed to House Speaker Mike Johnson, Yellen wrote that although the outstanding debt subject to the limit is expected to drop by approximately $54 billion when the new debt limit is established on January 2, it won’t be long before the US does hit its limit.
She said the Treasury Department will likely need to start making accounting manuevers between January 14 and 23 to prevent the US from defaulting.
The debt limit is the mechanism that restricts the amount of money the US can borrow. Much of that money goes toward programs like Social Security, Medicare, military salaries, interest on the national debt, and tax refunds, Yellen said in the letter.
The government could face trouble paying those bills if lawmakers fail to raise the debt limit.
Yellen’s warning comes days after President-elect Donald Trump pushed Congress to raise or eliminate the debt ceiling entirely. Lawmakers, however, failed to pass a two-year suspension extension while voting on a government spending bill earlier this month.
The Fiscal Responsibility Act of 2023 suspended the debt limit through January 1, 2025, following a contentious political fight. Republicans are set to take control of the government in January and will have to contend with the ongoing debt ceiling problem, which could affect financial markets and borrowing costs.
“I respectfully urge Congress to act to protect the full faith and credit of the United States,” Yellen wrote.
