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Federal government to hit $36T debt limit on Tuesday

Sat, January 18, 2025

Treasury Secretary Janet Yellen speaks during a Senate Appropriations Subcommittee on Financial Services and General Government hearing on Capitol Hill on June 4 and on Friday announced the federal government would reach its debt ceiling on Tuesday. File Photo by Ken Cedeno/UPI

Jan. 18 (UPI) -- President-elect Donald Trump will take charge of a federal government that will reach its self-imposed debt limit of $36 trillion a day after he is sworn in on Monday.

The Treasury Department on Friday announced the federal government's debt limit will be reached Tuesday, prompting Treasury Department officials to ask Congress to suspend or raise the debt limit.

Departing Treasury Secretary Janet Yellen urged Congress to "act promptly to protect the full faith and credit of the United States" Friday in a letter to House Speaker Mike Johnson, R-La.

"I will be unable to fully invest the portion of the Civil Service Retirement and Disability Fund not immediately required to pay beneficiaries" and the "Treasury Department will suspend additional investments of amounts credited to, and redeem a portion of the investments held by, the CSRDF," Yellen said.

The Treasury Department also will suspend investments in the Postal Service Retiree Health Benefits Fund through March 14.

Federal retirees and employees won't be affected by those actions, Yellen said.

She said the debt limit does not authorize new spending and creates a risk that the federal government "might not be able to finance its existing legal obligations" without suspending or increasing the debt limit.

The federal government's current fiscal year began on Oct. 1 and runs through September but it only is funded through March 14.

Several Republican lawmakers in the House of Representatives in December unsuccessfully sought to increase the debt limit by $1.5 trillion when enacting the current temporary federal budget that ends March 14.

Several GOP lawmakers also opposed raising the debt limit, although Trump has favored raising or eliminating the debt ceiling.

The current debt ceiling was established in the bipartisan Fiscal Responsibility Act that Congress passed in June 2023 and raised it from the prior $31.4 trillion limit.

Yellen says Treasury will use 'extraordinary measures' on Jan. 21 to prevent hitting debt ceiling

FATIMA HUSSEIN
Updated Fri, January 17, 2025 

People take their places as a rehearsal begins on the West Front of U.S. Capitol ahead of President-elect Donald Trump's upcoming inauguration, Sunday, Jan. 12, 2025, in Washington. (AP Photo/Jon Elswick)


WASHINGTON (AP) — In one of her last acts as Treasury Secretary, Janet Yellen said her agency will start taking “extraordinary measures,” or special accounting maneuvers intended to prevent the nation from hitting the debt ceiling, on January 21 in a letter sent to congressional leaders Friday afternoon.

She sent a letter in late December to lawmakers stating that Treasury expected to hit the statutory debt ceiling between January 14 and January 23. And now, the agency will stop paying into certain accounts, including the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund, to make up for the shortfall in money beginning Tuesday.

The move comes during the switchover of administrations, where President-elect Donald Trump takes over control of the White House and federal agencies from President Joe Biden on Monday. Yellen will be out of office when the extraordinary measures take effect.

The department has in the past deployed what are known as “extraordinary measures,” or accounting maneuvers, to keep the government operating. But once those measures run out, the government risks defaulting on its debt unless lawmakers and the president agree to lift the limit on the U.S. government’s ability to borrow.
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“The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. Government months into the future,” Yellen wrote in a letter addressed to House and Senate leadership.

“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” she said.

When the debt limit is raised or suspended those funds will be paid back and federal retirees and workers won't be affected by the actions.

Outgoing President Joe Biden in December signed a bill into law that averted a government shutdown but did not include President-elect Donald Trump’s core debt demand to raise or suspend the nation’s debt limit.

Trump has called for the statutory debt ceiling to be abolished. He told NBC News in December that getting rid of the debt ceiling entirely would be the “smartest thing" the Congress could do.

The federal debt currently stands at roughly $36 trillion — which ballooned across both Republican and Democratic administrations. And the spike in inflation after the coronavirus pandemic pushed up government borrowing costs such that debt service next year will exceed spending on national security.

Republicans, who will have full control of the White House, House and Senate in the new year, have big plans to extend Trump’s 2017 tax cuts and other priorities but debate over how to pay for them.

Trump has nominated South Carolina investor Scott Bessent, to lead the Treasury Department. During his confirmation hearing on Thursday, Bessent was questioned by Sen. Elizabeth Warren (D-Mass.), who asked whether Bessent thinks the statutory debt limit should be repealed.

Bessent said in response that if Trump wants to eliminate the debt limit, “I will work with him.”

“The U.S. is not going to default on its debt if I’m confirmed,” he said.





US to hit debt ceiling Tuesday, starting Congress’ countdown clock

Tami Luhby, CNN
Fri, January 17, 2025 

The nation will hit its roughly $36 trillion debt limit on Tuesday, when the Treasury Department will start taking extraordinary measures to allow the government to pay its bills, outgoing Treasury Secretary Janet Yellen said in a letter to congressional leaders on Friday. The notice comes just three days before President-elect Donald Trump takes office.

Reaching the cap ramps up pressure on congressional Republicans, but lawmakers have a little time before they must act to avoid a first-ever default, which would likely cause global economic upheaval. The extraordinary measures, which are mainly behind-the-scenes accounting maneuvers, will continue through March 14, Yellen wrote.

Although Republicans control Capitol Hill, they remain divided over how to address the debt ceiling. They have several major agenda items they want to push through Congress along party lines, including border security, energy and tax cuts, possibly in one package or two. Plus, lawmakers still must pass a government funding bill for fiscal year 2025, which began October 1. (A temporary spending measure expires on March 14.)

A bill to increase or suspend the debt ceiling could be included in one of these packages, though addressing the cap has been a bipartisan effort in recent years.

House Speaker Mike Johnson is already running up against resistance from some of his fiscally conservative members, who want to decrease the debt, not increase it. His super-slim majority will make it even more difficult for him to find a compromise — and he may need Democratic support in order to pass an increase to the limit.

The issue has already brought to light fissures within the party. In December, Trump demanded that lawmakers address the limit as part of a temporary spending bill. However, the GOP-led package, which included suspending the cap into January 2027, failed amid opposition that included a significant number of Republicans.

GOP leaders in the House in December floated an idea to raise the debt limit by $1.5 trillion as part of a first reconciliation package in 2025. The legislation would also include $2.5 trillion in cuts to net mandatory spending, aimed at satisfying conservative members. But that would buy the caucus only limited time before they face the cap again, experts said.

The debt ceiling had been suspended until January 2 as part of the bipartisan Fiscal Responsibility Act, which Congress approved in June 2023 after months of contentious debate between the GOP-led House and Democrats who controlled the Senate and White House. The cap at the time was $31.4 trillion.

In a technical quirk, the US didn’t actually hit the limit on January 2 because the debt level was projected to dip that day due to the scheduled redemption of certain securities, Yellen told Congress in late December. At the time, she forecast the cap would be reached between January 14 and January 23.
CNN.com

US to Take Extraordinary Steps to Avert a Default, Yellen Says

Christopher Anstey and Viktoria Dendrinou
Fri, January 17, 2025 

(Bloomberg) -- Outgoing Treasury Secretary Janet Yellen said her department will start taking special accounting maneuvers as of Jan. 21 to avoid breaching the US debt limit, and urged lawmakers again to take steps to increase or suspend the statutory ceiling.

Yellen wrote in a letter to bipartisan congressional leaders Friday she was advising them “of the extraordinary measures that Treasury will begin using on January 21.” That will be a day after the Biden administration leaves office. “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”

The letter marks the second notification in the latest tussle over the debt limit, which kicked back in as of Jan. 2, and likely the last for Yellen before the Trump administration takes office Jan. 20. Congress had suspended the ceiling in 2023 after a close-fought battle by lawmakers to avert a default on federal obligations. The limit is currently set at about $36 trillion.

Some debt-market strategists have anticipated an easier path to an agreement to suspend or lift the cap given Republicans’ unified control of Congress and the White House once Donald Trump takes office again Jan. 20. Until that action is taken, however, the Treasury will need to deploy measures used repeatedly over the decades to avoid breaching the limit.

Trump’s nominee to succeed Yellen as Treasury chief, Scott Bessent, vowed at his Senate confirmation hearing Thursday that there’d be no default on his watch.

Specific Measures

Yellen advised that the Treasury’s extraordinary measures would begin by redeeming a portion of, and suspending full investments in, the Civil Service Retirement and Disability Fund. It will also suspend additional investments of amounts credited to the Postal Service Retiree Health Benefits Fund.
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Those funds will be made whole after Congress acts on the debt ceiling, Yellen said. She gave no indication how long the accounting measures and Treasury’s cash balance would last.

“The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the US government months into the future,” she wrote.

Should the Treasury become unable to issue fresh debt and then run out of cash, the US government would be in danger of defaulting on some financial obligations. Wall Street is already trying to handicap how long the US government has before it’s unable to pay its bills because of the newly re-imposed debt ceiling. That so-called X-date has been estimated by some strategists as looming around July or August.

In the event of congressional standoffs, investors tend to dump the Treasury bills most vulnerable to a potential default in favor of securities maturing before or after the X-date, creating a kink in the curve. Right now, though, the bill market is showing no signs of angst, given the uncertainties about the outlook.

--With assistance from Alexandra Harris.

©2025 Bloomberg L.P.