Yellen’s Last-Minute Announcement Triggers Debt Crisis For Incoming Trump Administration

In a surprising move on her final day in office, outgoing Treasury Secretary Janet Yellen warned that the United States will hit its debt ceiling on January 21, just one day after President-elect Donald Trump is inaugurated. This revelation forces the incoming administration to confront an immediate fiscal challenge.

Yellen addressed a letter to House Speaker Mike Johnson (R-LA) and other congressional leaders, stating that the Treasury will initiate “extraordinary measures” to prevent the government from defaulting. These measures involve suspending investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.

“The period of time that extraordinary measures may last is subject to considerable uncertainty,” Yellen wrote, urging Congress to act swiftly to prevent damage to the nation’s credit rating.

Critics have slammed the timing of Yellen’s announcement, accusing the Biden administration of deliberately leaving Trump with a financial crisis. Social media users compared the move to dropping a “financial grenade” as the Biden team exits office.

The national debt now stands at more than $36 trillion, driven higher by government spending under both Republican and Democratic administrations. Rising inflation and interest rates have only worsened the situation, increasing the federal government’s borrowing costs.

President-elect Trump has consistently called for the elimination of the debt ceiling, describing it as a pointless restriction on government operations. His Treasury Secretary nominee, Scott Bessent, indicated during his confirmation hearing that he would work with Trump if tasked with removing the borrowing cap.

In response to the looming crisis, the Freedom Caucus proposed a two-part solution: raising the debt ceiling by $4 trillion while using budget reconciliation to push spending cuts. Trump reportedly prefers a more streamlined approach but remains open to negotiation.

This “unexpected” fiscal crisis places Trump and the GOP-controlled Congress in a difficult position as they prepare to implement their legislative agenda.

 

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