Janet Yellen issues warning to Congress as US nears debt limit

Janet Yellen, the treasury secretary.
Photo: FOX News

Treasury secretary says ‘extraordinary measures’ needed to avoid default, and urges lawmakers to raise borrowing limit, writes ‘The Guardian’.

Janet Yellen, the treasury secretary, has said her agency will need to start taking “extraordinary measures”, or special accounting maneuvers intended to prevent the nation from hitting the debt ceiling, as early as 14 January, in a letter sent to congressional leaders.

“Treasury expects to hit the statutory debt ceiling between January 14 and January 23,” Yellen wrote in a letter addressed to House and Senate leadership, at which point extraordinary measures would be used to prevent the government from breaching the nation’s debt ceiling – which has been suspended until 1 January.

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 US government’s ability to borrow.

The news comes after Joe Biden signed a bill into law last week that averted a government shutdown but did not include Donald Trump’s core debt demand to raise or suspend the nation’s debt limit.

The bill was approved by Congress only after fierce internal debate among Republicans over how to handle Trump’s demand. “Anything else is a betrayal of our country,” Trump said in a statement.

A few hours after Yellen released the statement, tech entrepreneur Elon Musk, now one of the closest allies of the president-elect, who has put him in charge of an ill-defined new unit – the “department of government efficiency” (Doge) – reposted part of an address by Milton Friedman, the famous free market economist of the free market.

Musk did not comment on Yellen’s remarks directly but the repost highlighted Friedman discussing the “free lunch myth… that government can provide goods and services at nobody’s expense”.

“Someone always pays – and usually, it’s you,” Friedman said in the address, indicating the general public. Musk commented: “Wise words from a true genius.”

The federal debt currently stands at roughly $36tn – which ballooned across 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.

Earlier this month, Yellen said she was “sorry” that “more progress” wasn’t achieved on the national debt during the Biden administration.

“Well, I am concerned about fiscal sustainability, and I am sorry that we haven’t made more progress,” Yellen said during a discussion held by the Wall Street Journal’s CEO Council summit.

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