Yellen warns Congress that the debt ceiling will be reached again in mid-January next year, and the Treasury Department will have to use extraordinary measures to avoid default.

As the New Year approaches, it seems that U.S. Treasury Secretary Yellen does not intend to let members of Congress have a good year. She formally warned lawmakers in a letter not to think that just because Congress had recently avoided a government shutdown, they would not face a new threat of debt default at the beginning of the year. On Friday, December 27, the U.S. Department of the Treasury's official website revealed that Yellen had written to leaders of both Republican and Democratic parties in the Senate and House of Representatives regarding the debt ceiling issue. The letter stated that the temporary suspension of the debt ceiling that was put into effect last June would expire on January 1, 2025. Therefore, starting from January 2, 2025, the debt ceiling would be reinstated and restrict the ability to incur further debt beyond what was legally already outstanding on January 1. Yellen stated that it was expected that debt subject to the debt ceiling on January 2 would decrease by approximately $54 billion, mainly due to the planned redemption of non-marketable securities held by the federal trust fund related to the federal Medicare program. As a result, the Treasury Department would not need to take special measures to prevent a debt default from occurring in the U.S. starting January 2. Yellen went on to say that the Treasury Department currently estimated that a new debt ceiling would be reached between January 14 and January 23, at which point extraordinary measures would need to be taken. In conclusion, Yellen urged Congress to take action to address the debt ceiling issue in order to protect the reputation of the U.S. abroad and the trust given to the U.S. by the international community. Last weekend, the U.S. Congress passed a short-term spending bill at the last minute to keep the government running until mid-March of next year. However, the bill did not include any provisions regarding the debt ceiling, and did not respond to President-elect Trump's calls to raise or eliminate the debt ceiling. Yellen's letter on Friday once again raised the issue of the debt ceiling threat. After Trump was elected as President of the United States last month, some financial analysts believed that the Republican victory had eased the debate over the debt ceiling and reduced the uncertainty surrounding the Treasury General Account (TGA) operations. The TGA is used to hold government revenues such as taxes and pay government expenses, maintaining an adequate cash balance to ensure the normal functioning of the federal government. In the absence of a resolution to the debt ceiling issue, the Treasury Department typically uses funds from the TGA and extraordinary measures to delay potential default. The TGA balance directly affects the government's ability to continue paying bills before reaching a new debt agreement, making it a key factor in the debt ceiling discussions. Financial analysts predict that assuming the Treasury Department's TGA balance is $700 billion in the fourth quarter of this year and with increased extraordinary measures, the Treasury Department is unlikely to run out of funds and face technical default until July 2025. The Republican election victory may mean fewer controversial debates. Historically, the most controversial debt ceiling debates have occurred when the White House was controlled by the Democratic party and the House of Representatives was controlled by the Republican party, such as in 2011, 2013, 2015, and 2023. This article was compiled from "Wall Street See" by GMTEight editor: Zhang Jinliang.