Yellen Warns Debt Limit Will Be Reached Soon

Treasury Secretary Janet Yellen warned Congress that the U.S. will reach its debt limit next week, and the department will have to take “certain extraordinary measures” to prevent the country from defaulting on its obligations.

Yellen wrote in a letter to new House Speaker Kevin McCarthy that by Thursday, Jan. 19, the U.S. is expected to hit the $31.38 trillion borrowing ceiling Congress approved in December 2021.

She added to address that, one extraordinary measure her department anticipates implementing this month is redeeming existing and suspending new investments in the Civil Service Retirement and Disability Fund, as well as the Postal Service Retiree Health Benefits Fund. Another is suspending reinvestment of the Government Securities Investment Fund and the Federal Employees Retirement System Thrift Savings Plan.

Temporary Fix

She explained those moves would reduce the amount of outstanding debt subject to the limit, and temporarily allow the Treasury to continue financing the operations of the federal government, likely through early June.

However, she argued that it’s “critical that Congress act in a timely manner to increase or suspend the debt limit” in order to protect the full faith and credit of the country. Yellen said that failure to meet the government’s obligations would cause “irreparable harm to the U.S. economy, the livelihood of all Americans, and global financial stability.”