Janet Yellen tells Congress US could hit obligation limit in mid-January

WASHINGTON — Treasury Secretary Janet Yellen said her agency will require to commence taking “extraordinary measures,” or special bookkeeping maneuvers intended to prevent the country from hitting the obligation ceiling, as early as January 14, in a note sent to congressional leaders Friday afternoon.

“Treasury expects to hit the statutory obligation ceiling between January 14 and January 23,” Yellen wrote in a note addressed to House and Senate leadership, at which point extraordinary measures would be used to prevent the government from breaching the country’s obligation ceiling — which has been suspended until Jan. 1, 2025.

The department has in the history deployed what are known as “extraordinary measures” or bookkeeping maneuvers to keep the government operating. But once those measures run out the government risks defaulting on its obligation unless lawmakers and the president consent to lift the limit on the U.S. government’s ability to borrow.

“I respectfully urge Congress to act to protect the packed belief and financing of the United States,” she said.

The information comes after President Joe Biden signed a invoice into law last week that averted a government shutdown but did not include President-elect Donald Trump’s core obligation demand to raise or suspend the country’s obligation limit. The invoice was approved by Congress only after fierce internal debate among Republicans over how to handle Trump’s demand. “Anything else is a betrayal of our country,” Trump said in a statement.

After a protracted debate in the summer of 2023 over how to pool the government, policymakers crafted the financial Responsibility Act, which included suspending the country’s $31.4 trillion borrowing authority until Jan. 1, 2025.

Notably however, Yellen said, on Jan. 2 the obligation is projected to temporarily reduce due to a scheduled redemption of nonmarketable financial instruments held by a federal depend pool associated with Medicare payments. As a outcome, “Treasury does not expect that it will be essential to commence taking extraordinary measures on January 2 to prevent the United States from defaulting on its obligations,” she said.

The federal obligation currently stands at roughly $36 trillion — which ballooned across both Republican and Democratic administrations. And the spike in worth rise after the coronavirus pandemic pushed up government borrowing costs such that obligation service next year will exceed spending on national safety.

Republicans, who will have packed control of the White House, House and Senate in the recent year, have large plans to extend Trump’s 2017 levy cuts and other priorities but debate over how to pay for them.