US Could Hit New Debt Limit by Mid-January

The United States may face its debt ceiling as early as mid-January, Treasury Secretary Janet Yellen warned on Friday, urging Congress to take swift action to safeguard the nation’s financial stability.

The debt ceiling, a cap on government borrowing to pay for existing obligations, has been suspended until January 1, 2025. On January 2, a new limit will automatically take effect, equal to the total debt issued by the Treasury Department at that time.

Treasury projections indicate that the country’s debt will decrease by approximately $54 billion on January 2, primarily due to the scheduled redemption of nonmarketable securities linked to Medicare payments. However, Yellen cautioned that the Treasury could hit the new limit between January 14 and January 23, at which point extraordinary measures would need to be implemented to prevent a government default.

“These measures will allow the Treasury to continue financing government operations temporarily, but Congress must act to protect the full faith and credit of the United States,” Yellen wrote in a letter to Republican House Speaker Mike Johnson and other lawmakers.

Raising the debt ceiling has historically been a contentious political issue, with conservatives opposing increases to the country’s current $36.2 trillion borrowing level. Multiple Republican lawmakers have resisted voting for previous hikes, complicating efforts to resolve the issue.

Failure to raise or suspend the debt ceiling before the Treasury’s options are exhausted could lead to a default on government obligations, triggering severe economic consequences for the United States and the global economy.

Congress has raised or suspended the debt ceiling over 100 times in the past, enabling the government to meet its spending commitments. The upcoming debate will test lawmakers' ability to navigate a politically charged issue that has profound implications for the world’s largest economy.

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