Janet Yellen issues grim warning to Congress over America's fiscal future
Outgoing Treasury Secretary Janet Yellen has issued a stark warning to Congress about the United States' fiscal future.
In a letter to Republican House Speaker Mike Johnson on Friday, Yellen claimed that the federal government will hit its debt limit as early as next month unless Congress takes action.
Otherwise, she said, the Treasury Department would have to begin taking 'extraordinary measures' to prevent the US from defaulting on its debt.
Such measures may include suspending certain types of investments in savings plans for government employees and health plans for retired postal workers, which would be restored once the debt ceiling is increased or eliminated.
'Treasury currently expects to reach the new limit between January 14 and January 23, at which time it will be necessary for Treasury to start taking extraordinary measures,' Yellen wrote, according to NBC News.
'I respectfully urge Congress to act to protect the full faith and credit of the United States.'
Once the US hits the debt ceiling, the government cannot borrow any more money and will default, leaving it unable to pay bills unless the president and Congress negotiate a way to lift the limit on the ability to borrow.
The debt ceiling was previously suspended in June 2023 following a contentious negotiation over federal spending, work requirements for receiving government benefits and funding the Internal Revenue Service.
But the suspension is now set to expire on January 2 - and when it is reinstated, the national debt would automatically increase by the amount of debt that has been incurred since the suspension.
Outgoing Treasury Secretary Janet Yellen claimed that the federal government will hit its debt limit as early as next month unless Congress takes action
She sent a letter to Republican House Speaker Mike Johnson saying the Treasury expects to reach the debt limit by mid January
Yellen now says the federal government only has a few weeks to pass legislation to raise debt ceiling before the Treasury would have to implement the 'extraordinary measures.'
Congress would then have several months to pass legislation to raise the debt ceiling, according to the Wall Street Journal.
But this is not the first time Yellen has raised concerns about the debt ceiling.
In 2021, she called the debt limit 'destructive' as she argued it should be eliminated, the New York Times reports.
President-elect Donald Trump has also spoken out in favor of eliminating the debt limit - which is typically a Democrat proposal.
'The Democrats have said they want to get rid of it,' Trump told NBC News. 'If they want to get rid of it, I would lead the charge.'
He also said last week that the 'debt ceiling guillotine' should either be extended or terminated before he takes office, as the national debt exceeds $36trillion.
Trump then tried to get a provision raising or eliminating the debt ceiling tacked on to the end-of-year spending bill, before he takes office and tries to pass through a new round of tax cuts and spending priorities.
President-elect Donald Trump has spoken out in favor of eliminating the debt limit - which is typically a Democrat proposal
The debt ceiling was previously suspended in June 2023 following a contentious negotiation over federal spending, work requirements for receiving government benefits and funding the Internal Revenue Service
Trump demanded Congress include provisions to extend or abolish the debt ceiling in the bill, threatening electoral primary challengers against Republicans who voted to fund the government while excluding debt limit.
In the end, 170 Republicans defied him, preventing the measure from moving forward.
But now Johnson, a Republican from Louisiana, faces a difficult time trying to get the debt ceiling raised or eliminated as the Republican party enjoys only a slim majority in the House of Representatives.
Republicans have historically cited the debt ceiling during negotiations with Democrats as they claim federal spending is too high, and have argued against its elimination or getting it raised.
Yellen now says the federal government only has a few weeks to pass legislation to raise debt ceiling before the Treasury would have to implement the 'extraordinary measures'
House Republicans have now been discussing raising the debt limit in a party-line bill as part of their efforts to increase border enforcement and extend tax cuts.
Doing so would not authorize any new spending, but would allow the Treasury to issue new debt to cover spending Congress has already authorized.
But raising the debt ceiling without any support from Democrats would mean only a few Republican defections could be afforded.
