Yellen Warns Debt Limit Will Be Reached Soon

Treasury Secretary will take 'extraordinary measures' to avert default, urges Congress to raise borrowing limit

WASHINGTON, DC - OCTOBER 06: U.S. Treasury Secretary Janet Yellen (C) listens to President Joe Biden during a hybrid meeting with corporate chief executives and members of his cabinet to discuss the looming federal debt limit in the South Court Auditorium in the Eisenhower Executive Office Building on October 06, 2021 in Washington, DC. Each of the meeting participants spoke in dire terms about the negative national and global economic reaction to Congress failing to raise the limit and the U.S. defaulting on its debt.

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Key Takeaways

  • U.S. Treasury Secretary Janet Yellen warned congressional leaders Friday that the U.S. will reach its borrowing limit Thursday, Jan. 19.
  • The debt ceiling was last raised by Congress in December 2021 to $31.38 trillion.
  • Yellen outlined 'extraordinary measures' available to the Treasury, but warned they might only be sufficient to cover obligations into June.

Treasury Secretary Janet Yellen warned Congress that the U.S. will reach its debt limit next week, and the department will have to take “certain extraordinary measures” to prevent the country from defaulting on its obligations.

Yellen wrote in a letter to new House Speaker Kevin McCarthy that by Thursday, Jan. 19, the U.S. is expected to hit the $31.38 trillion borrowing ceiling Congress approved in December 2021.

She added to address that, one extraordinary measure her department anticipates implementing this month is redeeming existing and suspending new investments in the Civil Service Retirement and Disability Fund, as well as the Postal Service Retiree Health Benefits Fund. Another is suspending reinvestment of the Government Securities Investment Fund and the Federal Employees Retirement System Thrift Savings Plan.

Temporary Fix

She explained those moves would reduce the amount of outstanding debt subject to the limit, and temporarily allow the Treasury to continue financing the operations of the federal government, likely through early June.

However, she argued that it’s “critical that Congress act in a timely manner to increase or suspend the debt limit” in order to protect the full faith and credit of the country. Yellen said that failure to meet the government’s obligations would cause “irreparable harm to the U.S. economy, the livelihood of all Americans, and global financial stability.”

Graph of the U.S. federal debt from the 1960s to the 2023.
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