Treasury Secretary Janet Yellen Warns of Potential Default Without Congressional Action
Treasury Secretary Janet Yellen warned congressional leaders on Friday that the federal government is likely to hit its debt limit as early as January 14, 2025, unless Congress takes action or her department implements “extraordinary measures” to avoid default. Yellen’s letter to House Speaker Mike Johnson, R-La, urged Congress to act to protect the full faith and credit of the United States.
The federal government’s debt ceiling is currently suspended until January 1, 2025, following the passage of the Fiscal Responsibility Act of 2023. Once the debt ceiling is reached, the government cannot borrow any more money and technically defaults, leaving it unable to pay bills unless the president and Congress negotiate a way to lift the limit on borrowing.
The federal debt currently stands at roughly $36 trillion. Democrats have long argued for raising or eliminating the debt ceiling, while Republicans have traditionally opposed it, citing the growing debt and arguing that federal spending is too high. However, President-elect Donald Trump has recently expressed support for abolishing the debt ceiling, saying that he would “lead the charge” if Democrats wanted to get rid of it.
The looming debt ceiling fight is likely to take place in the early months of next year, after President-elect Trump failed to get a provision raising or eliminating the debt ceiling included in an end-of-year spending bill. The dates Yellen cited could shift down the line, pushing the deadline further into 2025. The federal government can often operate for months under the “extraordinary measures” or accounting maneuvers referenced in Yellen’s letter.
