Treasury Secretary Janet Yellen has warned Congressional leaders that the federal government will reach its debt limit as early as January 14, unless action is taken or extraordinary measures are implemented. Yellen’s letter to House Speaker Mike Johnson emphasized the importance of protecting the full faith and credit of the United States by addressing the debt ceiling.
The impending debt ceiling fight is likely to happen in the early months of next year, as Congress and the new administration navigate this issue. While the dates provided by Yellen could shift, the federal government can normally operate for months under the extraordinary measures before defaulting when the debt ceiling is reached.
The debt ceiling, currently around $36 trillion, was suspended until January 1 due to the Fiscal Responsibility Act of 2023. The government cannot borrow more money or pay bills once the debt ceiling is reached unless Congress and the president negotiate an increase.
While Democrats advocate for raising or eliminating the debt limit, Republicans have traditionally opposed it due to concerns over increasing debt. President-elect Donald Trump recently supported eliminating the debt ceiling, but was unsuccessful in getting a provision included in the end-of-year spending bill.
Ultimately, the debt ceiling fight was added to the incoming administration’s list of priorities, with many Republicans defying Trump’s demands and including it in the legislation. This sets the stage for a potentially contentious debate over the debt ceiling and government spending in the early months of the new year.
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