Treasury Warns of Looming Debt Ceiling Crisis

U.S. Treasury Secretary Janet Yellen has warned lawmakers that "extraordinary measures" may be required as early as January 14 to prevent the United States from defaulting on its debt. In a letter to Congress, Yellen urged swift action to protect the nation’s creditworthiness.

The Treasury anticipates a $54 billion reduction in U.S. debt on January 2, tied to the redemption of securities related to Medicare payments. However, Yellen noted that the debt ceiling, suspended under a 2023 budget deal, will be reached between January 14 and 23, necessitating extraordinary measures to keep the government operational.

Congress must address the debt ceiling by next year to avoid a default, which could have catastrophic economic implications. Historically, Congress has adjusted the debt limit 103 times since its first cap of $45 billion was set in 1939. Today, publicly held debt stands at 98% of U.S. GDP, a significant increase from 32% in 2001.

Failure to act would prevent the Treasury from meeting its obligations, underlining the urgency of bipartisan cooperation on this politically fraught issue.