Treasury To Begin ‘extraordinary Measures’ As Us Approaches Debt Cliff

Treasury Secretary Janet Yellen said the federal government would hit the debt limit set by Congress on Tuesday, prompting the Treasury Department to take “extraordinary” steps to avoid a default.

Yellen said in a letter to Congressional leaders on Friday that Treasury would begin using those special accounting maneuvers to avoid default on Jan. 21, the day after President-elect Donald Trump takes office.

Yellen said Treasury would suspend investments into and tap the financial resources of federal retirement funds that aren’t immediately needed to pay out benefits to civil service or postal workers. But she did not say how much time those extraordinary measures would forestall a default.

“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 the letter.

Some outside estimates have projected that so-called X-date — when the government runs out of cash to cover its obligations — would not occur until sometime in the summer.

“Informed observers expect that extraordinary measures would allow Treasury to meet federal obligations until sometime in summer 2025,” the Congressional Research Service said in a report on Thursday.

The breach of the debt ceiling officially starts the clock on how long Trump and Congress will have to act to avoid a financially catastrophic default.

Republican leaders on Capitol Hill have been discussing how to address the looming debt limit deadline, either as part of a party-line reconciliation package or as part of government funding negotiations that will almost certainly require Democratic votes. Some Republicans have also discussed tying California wildfire aid to a debt limit increase.

Trump in December sought, unsuccessfully, to get Congress to raise the debt ceiling — or even scrap it entirely — under Biden’s watch. But 38 GOP lawmakers, mostly hardline fiscal conservatives, joined with most Democrats to sink a spending bill that included the debt ceiling extension that Trump wanted.

Scott Bessent, Trump’s pick to be Treasury secretary, said at his confirmation hearing on Thursday that he would work with Congress to repeal the debt limit entirely if Trump wanted to do so.

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

The debt limit was reinstated at $36.1 trillion on Jan. 2. The statutory cap on borrowing had previously been suspended since June 2023 when Congress passed a bipartisan deal reached between then-House Speaker Kevin McCarthy and President Joe Biden.