The U.S. Treasury may need to take “extraordinary measures” as early as January 14 to prevent a debt default, Treasury Secretary Janet Yellen warned Congress in a letter Friday. She urged lawmakers to act swiftly to safeguard the nation’s financial standing.
A $54 billion decrease in U.S. debt is expected on January 2 due to the redemption of nonmarketable securities related to Medicare payments. However, Yellen noted that Treasury projects hitting the debt limit between January 14 and January 23, at which point extraordinary measures will be required to keep the government operational.
Under the 2023 budget deal, Congress suspended the debt ceiling until January 1, 2025, allowing the Treasury to continue payments temporarily. However, lawmakers must address the debt limit next year to avoid severe economic repercussions. Failure to act could halt the Treasury’s ability to pay its obligations, potentially triggering a default.
The debt limit, established by Congress, caps the amount the government can borrow. Since the government spends more than it collects in revenue, raising the debt ceiling has become a recurring challenge. Established in 1939 at $45 billion, the limit has been raised 103 times to accommodate rising expenditures.
As of October, publicly held U.S. debt reached 98% of gross domestic product, a sharp rise from 32% in October 2001. Lawmakers face political resistance to increasing the debt ceiling, but action will be crucial to maintaining economic stability.
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