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Janet Yellen, the US treasury secretary, has notified Congress that the US is projected to reach its debt limit on Thursday, 19 January, and will then resort to “extraordinary measures” to avoid default.
In a letter to House and Senate leaders on Friday, Yellen said her actions will buy time until Congress can pass legislation that will either raise the nation’s $31.4tn borrowing authority or suspend it again for a period of time.
She urged lawmakers to act quickly to raise the debt ceiling to “protect the full faith and credit of the United States”.
“Failure to meet the government’s obligations would cause irreparable harm to the US economy, the livelihoods of all Americans and global financial stability,” she said.
Republicans now in control of the House have threatened to use the debt ceiling as leverage to demand spending cuts from Democrats and the Biden administration. This has raised concerns in Washington and on Wall Street about a bruising fight over the debt ceiling this year that could be at least as disruptive as the protracted battle of 2011, which prompted the brief downgrade of the US credit rating and years of forced domestic and military spending cuts.
The reported late on Friday that House Republicans had prepared an emergency plan for breaching the debt limit. The proposal, which was in the preliminary stages of being drafted, would direct the treasury department to prioritize certain payments if the US hits the debt ceiling, according to the newspaper.
