U.S. on Brink of Financial Crisis: Here’s What Happens if the Debt Limit Isn’t Raised in 3 Weeks!

Treasury Secretary Janet L. Yellen alerted Congress on Friday that the U.S. government has less than three weeks to raise its debt limit before resorting to “extraordinary measures” to maintain federal operations. This looming crisis highlights one of the significant challenges awaiting the incoming Trump administration.

In her letter to Congress, Yellen indicated that the government is rapidly depleting its funds to meet debt obligations. She noted that these extraordinary measures are likely to be implemented between January 14 and January 23, slightly later than initially anticipated. These measures would potentially provide Congress several months to address the issue before hitting the borrowing limit.

Yellen emphasized the urgency of the situation: “I respectfully urge Congress to act to protect the full faith and credit of the United States.”

The debt ceiling dictates how much the Treasury Department can borrow. Failing to increase this limit could have disastrous consequences for the global economy, as the U.S. government never defaulted on its debt obligations.

President-elect Donald Trump recently attempted to persuade congressional Republicans to either suspend the debt limit for two years or abolish it altogether during negotiations over government funding this month. However, this effort was unsuccessful, and House Speaker Mike Johnson (R-Louisiana) approved legislation to fund the government without any changes to the debt limit.

Earlier in 2023, President Joe Biden and former House Speaker Kevin McCarthy (R-California) reached a bipartisan agreement to suspend the debt limit for two years.

House Speaker Mike Johnson may face significant challenges in retaining his position while navigating this issue. If GOP leaders attempt to approve an increase without Democratic support, they would need to maintain unity among their ranks in the House, which is a narrow margin. However, seeking a deal with Democrats to lift or suspend the debt limit could alienate the right-wing faction whose support Johnson needs to remain speaker.

The stakes are high, and the clock is ticking as Congress must act swiftly to avoid a potentially catastrophic economic outcome.