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The news comes after President Joe Biden signed a bill into law last week that averted a government shutdown but did not include President-elect Donald Trump’s core debt demand to raise or suspend the nation’s debt limit. The bill was approved by Congress only after fierce internal debate among Republicans over how to handle Trump’s demand. “Anything else is a betrayal of our country,” Trump said in a statement.
After a protracted debate in the summer of 2023 over how to fund the government, policymakers crafted the Fiscal Responsibility Act, which included suspending the nation’s $31.4 trillion borrowing authority until Jan. 1, 2025.
Notably however, Yellen said, on Jan. 2 the debt is projected to temporarily decrease due to a scheduled redemption of nonmarketable securities held by a federal trust fund associated with Medicare payments. As a result, “Treasury does not expect that it will be necessary to start taking extraordinary measures on January 2 to prevent the United States from defaulting on its obligations,” she said.
The federal debt currently stands at roughly $36 trillion — which ballooned across both Republican and Democratic administrations. And the spike in inflation after the coronavirus pandemic pushed up government borrowing costs such that debt service next year will exceed spending on national security.
Republicans, who will have full control of the White House, House and Senate in the new year, have big plans to extend Trump’s 2017 tax cuts and other priorities but debate over how to pay for them.