US Treasury chief urges Congress to act on debt limit
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The Secretary of the US Treasury sends warning signs to Congress demanding it act on the country's debt limit amid Trump's calls to abolish it.
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US Treasury Secretary Janet Yellen speaks during a visit to the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, on January 8, 2024 (AP)
Treasury Secretary Janet Yellen cautioned Congress on Friday that "extraordinary measures" would be required as early as January 14 if lawmakers fail to raise or suspend the debt ceiling, Axios reported.
In a letter to House Speaker Mike Johnson, Yellen emphasized the urgency of addressing the debt limit to safeguard the full faith and credit of the United States. "I respectfully urge Congress to act," she wrote, warning of potentially dire consequences if the government could not meet its obligations.
President-elect Donald Trump has previously expressed support for abolishing the debt limit entirely, despite opposition from some of his allies who resisted raising the ceiling during Democratic administrations. The debate highlights deep partisan divides over fiscal policy as the government approaches another funding crisis.
The debt ceiling, which caps the amount the US government can borrow to fund programs such as Social Security and Medicare, was suspended until January 1, 2025, under the Fiscal Responsibility Act of 2023. However, outstanding debt is expected to drop by $54 billion on January 2 due to scheduled Medicare-related securities redemptions.
Despite this temporary reduction, the Treasury projects reaching the new borrowing limit between January 14 and January 23. Yellen indicated that extraordinary measures would then be necessary to prevent a default, including reallocating federal trust funds.
Abolishing the debt limit, a potential long-term solution would likely require significant Democratic support. This idea, while endorsed by Trump, faces strong opposition from fiscal conservatives who argue that it removes an important check on government spending.
The power duo, 'ridiculous debt ceiling'
Trump, still unsworn into office, is demonstrating both the influence and limits of his power over Congress as he intervenes from Mar-a-Lago, alongside Musk, who is leading the new Department of Government Efficiency, as reported by AP.
The report adds that the incoming Trump administration promises to cut the federal budget, lay off thousands of employees, and rely on Republicans for a major tax package. Unlike lawmakers, Trump isn't concerned about shutdowns, having initiated the longest government shutdown in history during his first term.
"If there is going to be a shutdown of government, let it begin now," Trump posted early in the morning on social media.
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More important to the president-elect was his demand to push the contentious debt ceiling debate off the table before returning to the White House. With the federal debt limit set to expire on January 1, Trump wants to avoid having the first months of his new administration consumed by difficult negotiations in Congress over raising the nation’s borrowing capacity, according to AP. Now, Johnson will be responsible for delivering on this.
"Congress must get rid of, or extend out to, perhaps, 2029, the ridiculous Debt Ceiling," Trump posted — increasing his demand for a new five-year debt limit increase. "Without this, we should never make a deal."
Government workers had already been instructed to prepare for a federal shutdown, which would keep millions of employees, including military personnel, without paychecks during the holiday season.
