Treasury Secretary Janet Yellen has notified Congress that the U.S. is projected to reach its debt limit on Thursday and will then resort to "extraordinary measures" to avoid default. Those measures include delaying some payments in order to provide some headroom to make other payments that are deemed essential, like those for Social Security and debt instruments. Yellen said Friday that while her department can't estimate how long extraordinary measures will allow the U.S. to continue to pay the government's obligations, "it is unlikely that cash and extraordinary measures will be exhausted before early June."
The federal government is on track to max out on its $31.4 trillion borrowing authority as soon as this month. That starts the clock on an expected standoff between President Joe Biden and the new House Republican majority. Both political parties' ability to navigate a divided Washington will be tested, with the fragile global economy at stake. Once the cap is hit the Treasury Department will be unable to issue new debt without congressional action. The government could be at risk of defaulting, possibly in midsummer, unless lawmakers and the Democratic president agree to lift the limit on the U.S. government's ability to borrow.
