US treasury to reach debt limit

The Treasury Department announced on Friday that the US might default on its debt as early as June, signaling a potential conflict in Congress following the Republican takeover of the House. In a letter to House Speaker Kevin McCarthy, Treasury Secretary Janet Yellen stated that the debt limit would be reached on January 19. Extraordinary measures will be required to avoid default, and she added that these measures would only provide a temporary solution.

Janet Yellen later wrote.

"It is unlikely that the government will exhaust its cash and extraordinary measures before early June. Failure to meet the government's obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability."

The Republicans control of the House has led to threats of using the debt ceiling as a bargaining chip to push for spending reductions from Democrats and the Biden administration. This has sparked worries in both Washington and Wall Street about a potentially damaging conflict over the debt ceiling this year. In 2011 this resulted in a temporary downgrade of the US credit rating and several years of mandatory domestic and military spending cuts.