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US Treasury Secretary Janet Yellen said her department will need to start taking so-called “extraordinary measures” to prevent the nation from hitting the debt ceiling as early as January 14.
If the US does hit the debt ceiling, the Treasury Department, responsible for ensuring financial security, will not have enough cash on hand to pay back debts.
That’s because the Treasury has to take on debt to make sure it has enough money to pay its bills — which can range from paying for social safety programs to paying interest to investors who have bought government bonds.
Once the US hits the debt ceiling, the Treasury is unable to borrow more money, which could force the country to default on its debt payments. The US has never defaulted on its debt before.
What did Janet Yellen say?
“Treasury expects to hit the statutory debt ceiling between January 14 and January 23,” Yellen wrote in a letter addressed to the House and Senate leadership.
The US debt limit was suspended in 2023 after a bipartisan deal between the Democrats and House Republicans.
But the suspension is scheduled to expire on January 2, 2025, forcing the Treasury to begin using so-called extraordinary measures to allow the government to keep paying its bills.
Yellen said that on January 2 the debt is set to decline slightly so the new limit will be reached again later in the month.
“Treasury does not expect that it will be necessary to start taking extraordinary measures on January 2 to prevent the United States from defaulting on its obligations,” she said.
“I respectfully urge Congress to act to protect the full faith and credit of the United States,” she said.
Congress last week passed a temporary government spending plan that funds the government through March 14 but does not address the debt ceiling. The new Congress will have to negotiate a deal once again at the time.
rm/jsi (AP, Reuters)
