Yellen Warns Of Immediate Debt Crisis As Trump Faces First Major Challenge

Treasury Secretary Janet Yellen delivered a surprise warning on her final day in office, revealing that the United States will reach its debt limit on January 21, only one day after President-elect Donald Trump assumes office. This looming fiscal crisis forces Trump and a Republican-led Congress to act swiftly.

In a letter to House Speaker Mike Johnson (R-LA) and other congressional leaders, Yellen outlined that the Treasury would begin “extraordinary measures” to avoid default. These measures include suspending contributions to federal retirement and health benefit funds.

“The debt limit does not authorize new spending but it creates a risk that the federal government might not be able to finance its existing legal obligations,” Yellen wrote, calling on Congress to act urgently.

The timing of the announcement has drawn sharp criticism. Many see it as a deliberate attempt by the outgoing Biden administration to burden Trump with an immediate economic dilemma. Critics on social media accused Yellen of leaving a “fiscal time bomb” for the incoming president.

Trump has long advocated for eliminating the debt ceiling altogether, arguing that it needlessly hampers government operations. His Treasury Secretary pick, Scott Bessent, confirmed during his confirmation hearing that he would support Trump’s proposal if asked to pursue it.

Meanwhile, congressional Republicans are divided on how to address the debt ceiling. The Freedom Caucus suggested a two-part plan: raising the ceiling by $4 trillion while pushing for spending reductions. Trump reportedly favors consolidating action into a single, decisive bill.

The national debt now stands at over $36 trillion, worsened by inflation and surging interest rates. This challenge will be one of the first and most significant hurdles for the Trump administration as it takes control of the federal government.