The US Treasury Department will start taking "extraordinary measures" next week to avoid risking a default on government debt, Secretary Janet Yellen said Friday, days before President-elect Donald Trump takes office.
With the government reaching its borrowing limit, the department would start making the moves on Tuesday, the day after the inauguration, Yellen said in a letter to congressional leaders.
That will mean Trump's administration has to grapple immediately with the issue of the debt ceiling -- the legal limit on government borrowing to pay bills already incurred.
In the past, Congress has routinely voted to lift this bar, but that tool has become a contentious issue, with Republican budget hawks calling for drastic spending reductions instead.
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"Extraordinary measures" are a way for the Treasury to ensure that the US government can keep paying its bills and avoid a hugely destabilizing debt default.
On Friday, Yellen said: "The period of time that extraordinary measures may last is subject to considerable uncertainty."
She noted there are challenges to forecasting the government's payments and revenue months into the future.
"I respectfully urge Congress to act promptly to protect the full faith and credit of the United States," Yellen wrote.
For now, she said the Treasury would hold off investments of the Civil Service Retirement and Disability Fund not immediately required to pay beneficiaries.
It would redeem a part of investments held by the fund, and also suspend added investments of amounts credited to the Postal Service Retiree Health Benefits Fund.
The funds will be made whole once the debt limit is raised or suspended.
"Federal retirees and employees will be unaffected by these actions," she said.
In mid-2023, US lawmakers voted to suspend the debt limit after weeks of fraught negotiations, to eliminate the threat of a default.
The limit was reinstated on January 2 and set at $36.1 trillion, matching the total debt outstanding on the previous day.
During December budget negotiations in Congress, Trump insisted the debt ceiling be raised or even eliminated altogether, although he was unsuccessful at the time.
On Thursday, Trump's Treasury secretary nominee Scott Bessent told lawmakers at his confirmation hearing that he would work with Trump to remove the limit if the incoming president wanted to do so.
He also vowed that the United States would not default on its debt if he became Treasury chief.
Earlier this month, Fitch Ratings said the United States faces "significant fiscal policy challenges in 2025."
It pointed to the debt limit, appropriations and "tax cuts in the context of already large deficits and an increasing debt burden."
"We believe it is unlikely that these will be resolved expeditiously because of long-standing weaknesses in the federal government's budgetary process and a narrow Republican House majority," Fitch added.