Treasury Secretary Janet Yellen warned Congress on Friday that “extraordinary measures” will be needed to prevent the U.S. from defaulting on its debt if the debt ceiling is not raised or suspended by mid-January.
In a letter to House and Senate leaders, Yellen said the national debt ceiling – the amount the federal government is allowed to borrow to pay debts such as Social Security and Medicare benefits – will end in June 2023. However, he pointed out that it would be temporarily suspended. It will come into effect again from January 1st.
The 78-year-old Treasury secretary is expected to reduce the national debt by $54 billion on Jan. 2, giving lawmakers weeks of additional legislative action before the government can no longer pay its bills on new debt. Congressional leaders have been informed that they may be given time to take action. limit.
“Treasury currently expects the new cap will be reached between January 14 and January 23, at which point Treasury will need to begin extraordinary measures.” Yellen wrote:.
“I respectfully ask Congress to act to fully protect the trust and confidence of the United States,” he added.
Yellen's warning is sure to set off contentious negotiations over how to deal with the debt ceiling days before the new Congress convenes on January 3.
Republicans are expected to hold slim majorities in both houses of Congress next year, but hardliners in the Republican caucus remain staunch opponents of last year's successful effort to end the debt ceiling.
The so-called Fiscal Responsibility Act of 2023 was negotiated by President Biden and former House Speaker Kevin McCarthy (R-Calif.) over the Memorial Day weekend, with 71 Republicans and 46 Democrats opposed, and a vote of 314. It passed the House with 117 votes. Measure.
The bill, which McCarthy supported, would limit non-defense discretionary spending to a 1% annual growth rate and would also claw back tens of billions of dollars from unused COVID-19 relief funds. It required significant support from the Democratic Party.
Meanwhile, President-elect Donald Trump has already expressed support for completely eliminating the debt ceiling.
Eliminating national debt limits becomes the 'smartest thing to do' [Congress] You can do it. I fully support that.” the president-elect told NBC News last week.
“Democrats say they want to get rid of it. If they want to get rid of it, I'll lead the way. It makes no sense other than psychologically,” Trump argued.
His proposal received support from some of his most vocal political opponents, including Sen. Elizabeth Warren (D-Mass.).
Warren: “I agree with President-elect Trump that Congress will eliminate the debt limit and ensure that we never again rule by hostages.'' I wrote to X.
Trump, 78, last week pressed lawmakers to include provisions to raise or eliminate the debt ceiling as part of a bill to keep the government funded.
The president-elect's 11th-hour proposal passed both houses of Congress and was not included in the spending bill that Biden, 82, recently signed into law.
The national debt now exceeds $36 trillion, an increase of about $5 trillion from the time of the 2023 debt ceiling fight.
When debt limits are reinstated next week, the amount of debt owed since the suspension will increase even further.
