Janet Yellen Says US May Hit Debt Limit in January
Janet Yellen Warns US Could Hit Debt Limit in January
In a letter to congressional leaders on Friday, U.S. Treasury Secretary Janet Yellen warned that the United States could reach its statutory debt limit between January 14 and 23, 2025, necessitating the implementation of “extraordinary measures” to avoid default. These measures, which involve special accounting maneuvers, have been used in the past to temporarily keep the government from breaching the debt ceiling.
Yellen urged lawmakers to act promptly to address the debt ceiling issue, which has been suspended until January 1, 2025, to prevent the government from defaulting on its obligations. The suspension of the debt limit has been in place since 2021, and with the deadline fast approaching, the Treasury Secretary emphasized that failure to raise or suspend the debt limit could have severe consequences for the U.S. economy and global markets.
While the Treasury expects to use these extraordinary measures starting in mid-January, Yellen pointed out that a temporary decrease in federal debt is expected around January 2, due to a scheduled redemption of nonmarketable securities tied to Medicare payments. As a result, the Treasury does not anticipate the need to take these extraordinary steps immediately on January 2. However, once these measures are exhausted, the government risks default unless Congress agrees to raise or suspend the debt ceiling.
The national debt currently stands at around $36 trillion, a significant increase that has occurred under both Republican and Democratic administrations. The COVID-19 pandemic and subsequent inflationary pressures have also contributed to higher government borrowing costs. Debt service in the upcoming year is projected to exceed national security spending, further intensifying concerns over the nation’s fiscal outlook.
Republican lawmakers, who will hold control of the White House and both chambers of Congress starting in 2025, are already discussing plans to extend tax cuts passed during the Trump administration in 2017, raising further concerns about the nation’s ability to balance the budget and manage its debt.
For more information on the U.S. debt situation and the federal budget, visit the U.S. Treasury Department and Congressional Budget Office.
