U.S. Treasury to establish new debt ceiling prior to Trump’s inauguration amid deteriorating crisis

Just weeks before Trump’s inauguration, the U.S. Treasury will reach its debt ceiling between January 14 and 23, which poses a risk of a government default.

On January 2, 2025, Treasury Secretary Janet Yellen issued a warning to Congress, stating that the debt limit will be adjusted to align with the current $36 trillion in national debt.

The Treasury will be compelled to implement “extraordinary measures” in order to maintain the government’s operations by mid-January. Yellen’s message was that the United States will be at risk of financial disaster if legislators fail to act to either raise or eliminate the debt ceiling.

She wrote, “I respectfully implore Congress to take action in order to safeguard the complete faith and credit of the United States.” But the remedy is far from apparent, given the escalating tensions and a politically divided Capitol.

The interest payments would be the gasoline if the increasing national debt were an explosion. The United States spent $1.15 trillion on interest payments alone in the past year. To put it simply, this amount exceeds the nation’s expenditures on defence and healthcare combined by $300 billion.

Interest rates have doubled in the past three years and are currently increasing at a rapid pace. Interest payments will surpass Social Security as the government’s largest expenditure within the next three years at this rate.

The Federal Reserve’s relentlessly high rates are beyond the Treasury’s capacity to accommodate, despite the fact that it is currently the nation’s largest borrower. The United States will reach its borrowing limit by January 14 to 23 if Congress does not take action.

Subsequently, the government will be unable to issue new debt, rendering it unable to pay its expenses. Social Security, Medicare, and military operations, among other federal programs, may experience substantial funding reductions.

Trump defied Republican convention by advocating for the complete elimination of the debt ceiling. He stated, “The Democrats have expressed their desire to eliminate it. I would be the one to lead the charge if they wish to eliminate it.”

Trump threatened primary challenges against Republicans who opposed him by demanding that Congress include a debt ceiling provision in its end-of-year funding bill. However, despite his influence, 170 Republicans refused to negotiate the debt ceiling, thereby relegating the matter to his successor.

The division in Washington remains as acute as ever. The debt ceiling is a tool that is outmoded and only serves to generate unnecessary crises, according to Democrats.

On the other hand, Republicans regard it as a negotiating position to limit government expenditure. New tensions within his own party have been generated as a result of Trump’s blurring of the lines.

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