President Donald Trump’s nominee for Treasury Secretary, Scott Bessent, passed his first major hurdle on Tuesday, January 21, when the Senate Finance Committee approved his candidacy. However, his confirmation process unfolds against the backdrop of a looming financial crisis, as the Treasury Department initiates “extraordinary measures” to prevent the U.S. from defaulting on its debt.
The national debt reached an all-time high of $36.2 trillion Tuesday morning, just over the $36.1 trillion cap set by Congress. This has forced the Treasury to implement unconventional fiscal strategies to continue meeting the government’s financial obligations without incurring further debt. These extraordinary measures, while a temporary fix, underline the urgency of addressing the debt ceiling.
What Are Extraordinary Measures?
The Treasury Department’s extraordinary measures are stopgap solutions designed to free up cash and delay default. These include suspending investments in certain federal retirement funds, a tactic Janet Yellen, the outgoing Treasury Secretary, deployed this week.
Specifically, the Treasury is deferring investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. While these actions temporarily free up funds, they are not cost-saving measures. Once the debt ceiling is raised, the government must replenish these accounts, restoring the investments and interest owed.
Yellen assured federal retirees and postal workers that their benefits would remain unaffected by these maneuvers, but she emphasized the precariousness of the situation. “How long the department can use extraordinary measures to avoid defaulting on U.S. debt is subject to considerable uncertainty,” Yellen warned in a letter to House Speaker Mike Johnson (R-La.).
What Happens If the Debt Ceiling Isn’t Raised?
If Congress fails to raise or suspend the debt ceiling in time, the U.S. risks defaulting on its obligations for the first time in history. This would mean the government could no longer pay its bills, including Social Security benefits, military salaries, and interest on the national debt. Economists warn that such a scenario could trigger a global financial crisis, erode trust in U.S. creditworthiness, and lead to higher borrowing costs for decades to come.
The Treasury Department’s current measures are projected to last until March 14, but the exact timeline depends on factors such as tax revenues, economic activity, and federal spending. The uncertainty heightens tensions on Capitol Hill as lawmakers grapple with the political and economic stakes of yet another debt ceiling showdown.
The Debt Ceiling Debate
The debt ceiling, a statutory limit on how much the federal government can borrow, has long been a contentious issue in Washington. Critics argue that it serves no practical purpose and only adds unnecessary drama to fiscal management. Proponents counter that it provides a critical check on government spending.
President Trump, however, has proposed eliminating the debt ceiling altogether. In a December interview with NBC News, he called the limit “an outdated and unnecessary constraint,” adding, “It doesn’t mean anything, except psychologically.”
Senator Elizabeth Warren (D-Mass.), an unlikely ally of Trump’s on this issue, expressed her support for scrapping the debt ceiling during Bessent’s confirmation hearing last week. “If he wants to eliminate the debt limit, I will work with him and you on that,” Warren told the nominee.
Bessent acknowledged the debate but struck a cautious tone. “The debt ceiling is like a handbrake in a car. Removing it doesn’t mean you’ll crash, but it’s one less tool to slow things down,” he said, emphasizing that the U.S. must still exercise fiscal discipline even if the limit is abolished.
A History of Debt Ceiling Battles
Congress has raised or suspended the debt ceiling 78 times since 1960, according to Treasury data. These actions are typically contentious, often turning into high-stakes political standoffs.
In June 2023, lawmakers suspended the debt ceiling to allow the government to borrow up to $36.1 trillion, a figure reached just three weeks after the suspension lifted on January 1, 2025. This cycle of brinkmanship has led to significant consequences: in 2023, both Fitch Ratings and Moody’s downgraded the U.S. credit rating, citing the uncertainty and dysfunction surrounding debt ceiling negotiations.
“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch noted in its downgrade announcement.
The Road Ahead: Rising Debt and Economic Pressures
The U.S. debt burden is poised to grow even larger. Last week, the nonpartisan Congressional Budget Office (CBO) warned that federal debt could balloon to $52 trillion by 2035 if current trends continue. When measured against economic output, federal debt is projected to rise from 100% of gross domestic product (GDP) in 2025 to 118% by 2035, far exceeding the previous record of 106% set in 1946.
This escalating debt stems from a combination of rising entitlement spending, interest payments on the debt, and sluggish revenue growth. Unless structural reforms are implemented, the CBO predicts that debt payments alone will consume a growing share of the federal budget, leaving less room for essential programs and investments.
Political and Economic Stakes
For Scott Bessent, the debt ceiling crisis is both a test of his leadership and a chance to shape the country’s fiscal future. During his confirmation hearing, he assured lawmakers that under his stewardship, the Treasury would take every measure necessary to avoid a default.
“We will not default on U.S. debt. That is a commitment I make to this committee and the American people,” Bessent said.
However, as Congress faces yet another high-stakes debate over the debt ceiling, the broader question remains: how long can the U.S. rely on temporary fixes and partisan negotiations before the fiscal system reaches its breaking point?
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