Yellen’s Last-Minute Debt Warning Forces Trump To Confront Fiscal Crisis

Outgoing Treasury Secretary Janet Yellen delivered a major blow to the incoming Trump administration by announcing that the United States will hit its debt ceiling on January 21, just one day after President-elect Donald Trump is sworn into office. The unexpected announcement sets the stage for an immediate fiscal showdown in Washington.

In a letter sent to House Speaker Mike Johnson (R-LA) and other congressional leaders, Yellen explained that the Treasury Department will implement “extraordinary measures” to prevent the U.S. government from defaulting. These measures include 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 avoid economic fallout.

Critics have blasted Yellen’s timing, accusing the Biden administration of intentionally delaying this announcement to saddle Trump with a financial crisis. Some have likened her exit to leaving behind a fiscal “landmine” for the new administration.

With the national debt now exceeding $36 trillion, the financial burden on the federal government continues to grow. Inflation and rising interest rates have only worsened the situation, pushing borrowing costs even higher.

President-elect Trump has long criticized the debt ceiling, calling it an unnecessary limit that hampers government operations. His pick for Treasury Secretary, Scott Bessent, has signaled his willingness to work with Trump to eliminate the borrowing cap if confirmed.

House Republicans are exploring different strategies to address the crisis. The Freedom Caucus has proposed raising the debt ceiling by $4 trillion alongside significant spending cuts. Trump reportedly favors a more streamlined approach but remains open to various solutions.

This unexpected fiscal challenge puts Trump and the GOP-led Congress under immediate pressure to act as they prepare to implement their legislative agenda.