The US Treasury Department is on track to hit its borrowing limit in mid-January, according to a statement from Treasury Secretary Janet Yellen. The milestone marks the first time the department has reached its debt ceiling since 2021.
Yellen's announcement comes as lawmakers are still grappling with a contentious spending bill that would need to be approved by Congress to avoid a government shutdown and prevent the US from defaulting on its debt. The legislation, which was agreed upon by congressional leaders, includes $1.7 trillion in annual spending over two years, with some provisions earmarked for defense and others focused on social safety net programs.
The Treasury Department's ability to borrow money is limited by a statutory cap, known as the public debt limit, which has been raised several times since 2021. Currently, the US has already exceeded that limit by about $2 trillion. Yellen said the new borrowing will be necessary to support ongoing government operations and pay interest on outstanding debts.
The Treasury Department's warning comes as tensions in Washington have intensified over the issue of raising the debt ceiling. Some lawmakers have expressed opposition to increasing the public debt limit, citing concerns about inflation and national debt. Others argue that failing to raise the limit would cause irreparable harm to the US economy and lead to a default on its debts.
Yellen's statement suggests that Congress needs to act quickly to approve the spending bill and increase the public debt limit before January 19th,
when the Treasury Department will reach its borrowing capacity. If no action is taken by then, it would trigger a series of automatic spending cuts and potentially even a government shutdown.
A failure to raise the public debt limit has happened several times in US history, most recently in 2011-2012, when Congress was unable to agree on how to address concerns about national debt. At that time, the country came within days of defaulting on its debts before a last-minute deal was reached to increase the borrowing limit.
The implications of failing to raise the public debt limit are far-reaching and could have significant consequences for the US economy. Higher interest rates, lower consumer spending, and reduced investor confidence could all occur if investors lose faith in the ability of the US government to manage its finances.
In a statement accompanying Yellen's announcement, White House Press Secretary Karine Jean-Pierre urged lawmakers to put aside partisan differences and work together to approve the spending bill and increase the public debt limit. She said the need for swift action on this issue cannot be overstated, as the Treasury Department is already facing challenges in managing its finances due to a combination of factors including inflation and higher-than-expected borrowing needs.
As lawmakers continue to debate how to address the US national debt, it's clear that time is running out. With the Treasury Department set to reach its borrowing limit by mid-January, Congress must work together to find a solution before then.