“U.S. Debt Ceiling Deadline Approaches: Treasury Secretary Yellen Warns of Mid-January Cutoff”

**U.S. Debt Ceiling Deadline Approaches: Treasury Secretary Yellen Warns of Mid-January Cutoff**

As the United States inches closer to its debt ceiling deadline, the nation finds itself on the brink of a potential financial crisis. Treasury Secretary Janet Yellen has issued a stark warning, emphasizing that the federal government could hit its borrowing limit as early as mid-January. This looming deadline has reignited debates in Washington over fiscal responsibility, government spending, and the potential consequences of failing to raise or suspend the debt ceiling.

### What is the Debt Ceiling?

The debt ceiling is a legal cap set by Congress on the total amount of money the federal government is authorized to borrow to meet its financial obligations. These obligations include funding for Social Security, Medicare, military salaries, interest on the national debt, and other essential programs. When the government reaches this limit, it cannot issue new debt to cover its expenses, forcing it to rely solely on incoming revenue.

The current debt ceiling, set at $31.4 trillion, was last raised in December 2021. Since then, the federal government has continued to borrow to fund its operations, and now, according to Secretary Yellen, the Treasury Department is rapidly approaching the limit.

### Treasury Secretary Yellen’s Warning

In a letter to congressional leaders, Secretary Yellen cautioned that the U.S. could reach its borrowing limit by mid-January 2024. She urged lawmakers to act swiftly to either raise or suspend the debt ceiling to avoid catastrophic economic consequences. “Failing to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Yellen wrote.

Yellen also highlighted the potential use of “extraordinary measures” to temporarily stave off default. These measures include reallocating certain government funds to free up cash for critical payments. However, she warned that these measures would only provide a short-term solution, buying a few weeks or months at most.

### The Consequences of Inaction

If Congress fails to act in time, the U.S. government could default on its debt for the first time in history. Such a scenario would have far-reaching consequences, including:

1. **Economic Recession**: A default could trigger a severe economic downturn, as government spending would be drastically curtailed. This could lead to job losses, reduced consumer spending, and a decline in GDP.

2. **Global Financial Instability**: The U.S. dollar and Treasury bonds are considered safe-haven assets in global markets. A default would undermine confidence in these assets, potentially destabilizing international financial markets.

3. **Rising Borrowing Costs**: Even the threat of a default could lead to higher interest rates on U.S. debt, increasing borrowing costs for the government, businesses, and consumers.

4. **Impact on Social Programs**: Without the ability to borrow, the government may struggle to fund essential programs like Social Security, Medicare, and veterans

• Source Link: https://platodata.ai/debt-ceiling-drama-returns-yellen-warns-of-mid-january-deadline-forexlive/