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

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

As the United States approaches yet another critical fiscal deadline, Treasury Secretary Janet Yellen has issued a stark warning about the nation’s debt ceiling, cautioning that the government could hit its borrowing limit by 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 in time.

### 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 existing obligations. These obligations include funding for Social Security, Medicare, military salaries, interest on the national debt, and other government programs. When the government reaches this limit, it cannot issue new debt to pay for these commitments, potentially leading to a default.

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 the Treasury Department has warned that the limit will soon be reached.

### Yellen’s Warning

In a letter to congressional leaders, Secretary Yellen emphasized the urgency of addressing the debt ceiling, stating that the Treasury Department expects to exhaust its “extraordinary measures” by mid-January. These measures, which include reallocating funds and delaying certain payments, are temporary solutions designed to buy time for Congress to act. However, Yellen made it clear that these measures are not a long-term fix and that failure to raise or suspend the debt ceiling could have catastrophic consequences for the U.S. economy.

“Failure 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. She urged lawmakers to act swiftly to avoid a crisis.

### The Stakes of Inaction

If Congress fails to address the debt ceiling before the deadline, 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 financial crisis, leading to higher borrowing costs, plummeting stock markets, and a loss of consumer and business confidence. Economists warn that this could push the U.S. economy into a recession.

2. **Global Financial Instability**: As the world’s largest economy and the issuer of the global reserve currency, a U.S. default would send shockwaves through international markets. It could undermine confidence in U.S. Treasury bonds, which are considered one of the safest investments in the world.

3. **Higher Interest Rates**: A default would likely lead to a downgrade of the U.S. credit rating, causing interest rates to rise. This would increase borrowing costs for the government, businesses, and consumers, further straining the economy.

4. **Disruption of Government Services

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