Yellen: US could hit debt ceiling by mid-January

U.S. Treasury Secretary Janet Yellen said the Treasury Department expects the United States to hit its debt ceiling as early as mid-January 2025 and may need to take "extraordinary measures" to avoid the federal government defaulting on its debt.

In a letter to congressional leaders on Friday, Yellen said the Treasury expects the U.S. to hit its debt ceiling as early as January 14-23. She urged Congress to act quickly to preserve America's credit and fiscal stability.

Ms. Yellen's "extraordinary measures" refer to a temporary accounting maneuver by the Treasury Department to keep the government running if Congress fails to raise or suspend the debt ceiling in time. If the extraordinary measures run out and Congress fails to raise or suspend the debt ceiling, the Treasury will be unable to pay and the government will default on its debts.

Yellen noted that while the Fiscal Responsibility Act of 2023 has suspended the debt ceiling until January 1, the total federal debt has reached $36 trillion, with borrowing costs rising sharply due to post-pandemic inflationary pressures, and interest payments on the debt are expected to exceed the defense budget next year.

The U.S. House and Senate passed a short-term spending bill Friday, averting a last-minute shutdown of the federal government without funding. The bill extends government funding through March 14, provides $100 billion for stricken states and $10 billion in economic aid for farmers, but does not raise the debt ceiling.

President-elect Donald Trump had been pushing Congress to raise the debt ceiling, or even eliminate it altogether, before he is sworn in on January 20.