Yellen says extraordinary measures to avoid default will begin as soon as Jan. 14
Treasury Secretary Janet Yellen suggested in a letter to Congress on Friday that the department doesn't think the U.S. will need to take "extraordinary measures" on Jan. 2 to avoid defaulting on its obligations, and instead expects that it will reach the new limit between Jan. 14 and 23.
"Treasury currently expects to reach the new limit between January 14 and January 23, at which time it will be necessary for Treasury to start taking extraordinary measures," Yellen wrote in the letter.
Such measures would be shifting federal funds from certain accounts to pay immediate expenses and other ways to make sure the Treasury has enough cash on hand to pay debts. Failing to raise the debt limit after running out of money could force the U.S. to default on debt payments, which could trigger a financial crisis.
In the letter, Yellen said that the outstanding debt is projected to decrease by roughly $54 billion, which is why the department does not think it's necessary for extraordinary measures to be taken on Jan. 2 and should instead be pushed to sometime between Jan. 14 and 23.
"I respectfully urge Congress to act to protect the full faith and credit of the United States," the letter read.
Yellen's letter comes as President-elect Trump floated eliminating the debt ceiling, which limits how much debt the Treasury Department can incur by issuing bonds, which are widely bought and sold in financial markets. Raising the limit would potentially allow for trillions of dollars in tax cuts that Republicans have been eager to secure.
The incoming president signed three debt ceiling extensions into law during his first presidency without cutting debt.
The issue has largely become a leverage point in funding disputes for lawmakers in Congress over the past two decades.
The president and Congress can lift the debt ceiling by raising it to a certain monetary level, or suspending it for a period of time. Both options allow the Treasury to take on as much debt as necessary to pay for expenses already approved by law until the debt ceiling is reached, or the limit is reimposed.