U.S. Treasury Secretary Janet Yellen speaks during a visit to the Financial Crimes Enforcement Network in Vienna, Va., on Jan. 8.
U.S. Treasury Secretary Janet Yellen speaks during a visit to the Financial Crimes Enforcement Network in Vienna, Va., on Jan. 8. (Susan Walsh | AP)

WASHINGTON — Treasury Secretary Janet Yellen said her agency will need to start taking “extraordinary measures,” or special accounting maneuvers intended to prevent the nation from hitting the debt ceiling, as early as Jan. 14, in a letter sent to congressional leaders Friday afternoon.

Once again, the debt ceiling is roiling Washington. Here are 4 things to know

Lawmakers will have to authorize additional borrowing to pay the government’s bills, but there’s no reason it has to be done right away — except for politics.

“Treasury expects to hit the statutory debt ceiling between January 14 and January 23,” Yellen wrote in a letter addressed to House and Senate leadership, at which point extraordinary measures would be used to prevent the government from breaching the nation’s debt ceiling — which has been suspended until Jan. 1, 2025.

The department has in the past deployed what are known as “extraordinary measures” or accounting maneuvers to keep the government operating. But once those measures run out the government risks defaulting on its debt unless lawmakers and the president agree to lift the limit on the U.S. government’s ability to borrow.

The debt ceiling, extraordinary measures, and the X Date. Why it all matters.

Every year, the U.S. government spends more money than it takes in. In order to fund all that spending, the country takes on debt. Congress has the power to limit how much debt the U.S. takes on. Right now, the debt limit is $31.4 trillion dollars. Once we reach that limit, Congress has a few options so that the government keeps paying its bills: Raise the debt limit, suspend it, or eliminate it entirely. That debate and negotiations are back this season. One thing that is in short supply, but very important for these negotiations, is good information. Shai Akabas, of the Bipartisan Policy Center, knows this well. Right now, he and his team are working on figuring out when exactly the U.S. government could run out of money to pay its obligations — what they’ve dubbed: the “X Date.” Shai is determined to help prevent the U.S. government from blowing past the X Date without a solution. But this year’s debt-ceiling negotiations are not going very well. Which is daunting, because if lawmakers don’t figure something out, the ramifications for the global economy could be huge. So, how did Shai become the go-to expert at the go-to think tank for debt ceiling information? It started in 2011, back when he and current Chair of the Federal Reserve Jay Powell, armed with a powerpoint and the pressure of a deadline, helped stave off economic disaster. Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.

“I respectfully urge Congress to act to protect the full faith and credit of the United States,” she said.

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.

Biden signs stopgap spending bill, preventing a government shutdown

Congress has approved a short-term spending bill to fund the government until March 14. President Biden signed the legislation on Saturday.

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.