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Treasury Secretary Janet Yellen warned that the United States will hit the debt ceiling on January 19. She urged Congress to raise the debt limit to avoid a catastrophic default.
"Failure to meet the government's obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability," Yellen wrote in a letter to lawmakers.
Yellen said that a drawn-out political fight to raise the debt ceiling could harm the United States' credit rating. She reminded Congress that a battle over the debt ceiling in 2011 "caused real harms, including the only credit rating downgrade in the history of our nation."
Yellen said the Treasury Department is prepared to begin "certain extraordinary measures" to avoid a default. Some of those measures include suspending investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.
She said it is unknown how long those measures would last but said it was "unlikely" they "will be exhausted before early June."
Newly elected House Speaker Kevin McCarthy said that Republicans "don't want to put any fiscal problems through our economy, and we won't." However, he did not commit to raising the debt limit without extracting some spending concessions from Democrats.
"Spending is out of control here," he said. "There's been no oversight, and we cannot continue around the same process."