Yellen says Treasury will take ‘extraordinary measures’ on January 21 to avoid hitting debt ceiling

WASHINGTON (AP) — In one of his final acts as Treasury secretary, Janet Yellen said his agency would begin taking “extraordinary measures,” or special accounting maneuvers intended to prevent the nation from hitting the debt ceilingon Jan. 21, in a letter sent to congressional leaders Friday afternoon.

She sent a letter end of December to lawmakers by stating that the Treasury expected to reach the statutory debt ceiling between January 14 and 23. And now the agency will stop making contributions to some accounts, including the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Insurance Fund, to make up for the money shortfall starting Tuesday.

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

The department has in the past deployed what are called “extraordinary measures,” or accounting maneuvers, to keep the government functioning. But once those measures expire, the government risks being unable to repay its debt unless lawmakers and the president agree to lift the limit on the U.S. government’s borrowing capacity.

“The period over which the extraordinary measures may last is subject to considerable uncertainty, including challenges in forecasting U.S. government payments and revenues in the coming months,” Yellen wrote in a letter to U.S. government leaders. House and Senate.

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

When the debt ceiling is raised or suspended, these funds will be repaid and retirees and federal workers will not be affected by these measures.

Outgoing President Joe Biden in December signed a bill which avoided a government shutdown but did not include President-elect Donald Trump’s core debt request increase or suspend the national debt ceiling.

Trump has called for the statutory debt ceiling to be abolished. He told NBC News in December that removing the debt ceiling altogether would be the “smartest thing” Congress could do.

The federal debt currently stands at about $36 trillion – a figure that has exploded in both Republican and Democratic administrations. And soaring inflation after the coronavirus pandemic has driven up government borrowing costs, so that debt service next year will exceed national security spending.

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 are debating on how to finance them.

Trump named South Carolina investor Scott Bessent to head the Treasury Department. At his confirmation hearing Thursday, Bessent was questioned by Sen. Elizabeth Warren (D-Mass.), who asked whether Bessent thought the legal debt limit should be repealed.

Bessent responded that if Trump wanted to eliminate the debt ceiling, “I would work with him.”

“The United States will not default on its debt if I am confirmed,” he said.

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