Written by Jasper Ward and Kanishka Singh
WASHINGTON (Reuters) – The U.S. Treasury may need to take “extraordinary measures” by January 14 to prevent the United States from defaulting on its debt, U.S. Treasury Secretary Janet Yellen told lawmakers in a letter on Friday.
Yellen urged lawmakers in the US Congress to act “to protect the full confidence and trust of the United States.”
She added that US debt is expected to fall by about $54 billion on January 2 “due to the scheduled redemption of non-marketable securities held by a federal trust fund linked to Medicare payments.”
“The Treasury currently expects to reach the new limit between January 14 and 23, at which time it will be necessary for the Treasury to begin taking extraordinary measures,” she said.
Under the 2023 budget deal, Congress suspended the debt ceiling until January 1, 2025. The US Treasury will be able to pay its bills for several more months, but Congress will have to address the issue sometime next year.
Failure to act could prevent the Treasury from paying its debts. A default on US debt would likely have severe economic consequences.
A debt limit is a limit set by Congress on how much money the U.S. government can borrow. Because the government spends more money than it collects in tax revenue, lawmakers need to periodically address the issue — a politically difficult task, as many are reluctant to vote for more debt.
Congress first set the debt limit at $45 billion in 1939, and has had to raise that limit 103 times since then, as spending has consistently exceeded tax revenues. In October, public debt reached 98% of US GDP, compared to about 32% in October 2001.
