US might hit new debt restrict as early as Jan 14, Yellen says

By Jasper Ward and Kanishka Singh

WASHINGTON (Reuters) – The U.S. Treasury Division might must take “extraordinary measures” by as early as Jan. 14 to forestall the US from defaulting on its debt, Treasury Secretary Janet Yellen advised lawmakers in a letter on Friday.

Yellen urged lawmakers within the U.S. Congress to behave “to guard the complete religion and credit score of the US.”

U.S. debt is predicted to lower by about $54 billion on Jan. 2 “on account of a scheduled redemption of nonmarketable securities held by a federal belief fund related to Medicare funds,” she added.

She mentioned: “Treasury at the moment expects to achieve the brand new restrict between January 14 and January 23, at which era will probably be essential for Treasury to start out taking extraordinary measures.”

Beneath a 2023 finances deal, Congress suspended the debt ceiling till Jan. 1, 2025. The U.S. Treasury will be capable of pay its payments for a number of extra months, however Congress must handle the difficulty sooner or later subsequent yr.

Failure to behave may forestall the Treasury from paying its money owed. A U.S. debt default would possible have extreme financial penalties.

A debt restrict is a cap set by Congress on how a lot cash the U.S. authorities can borrow. As a result of the federal government spends more cash than it collects in tax income, lawmakers must periodically sort out the difficulty — a politically troublesome process, as many are reluctant to vote for extra debt.

Congress set the primary debt restrict of $45 billion in 1939, and has needed to increase that restrict 103 occasions since, as spending has constantly outrun tax income. Publicly held debt was 98% of U.S. gross home product as of October, in contrast with 32% in October 2001.