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WASHINGTON — The U.S. government will hit its borrowing limit next week, forcing the new, divided Congress into negotiations over the debt limit much sooner than expected, though a potential date for the nation to default isn’t expected until this summer.

Treasury Secretary Janet Yellen wrote to Congress on Friday afternoon, telling leaders the United States will hit the debt ceiling on Jan. 19, after which she’ll use accounting maneuvers, which she called “extraordinary measures,” to keep U.S. finances up and running for a few months.

Yellen urged the Republican House and Democratic Senate to get to work on a bipartisan debt limit bill quickly, writing it is “critical that Congress act in a timely manner.” The January date is much sooner than the third quarter of this year, the preliminary estimate the Bipartisan Policy Center released last June.  

“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. “Indeed, in the past, even threats that the U.S. government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”  

Treasury Secretary Janet Yellen

Yellen said use of the extraordinary measures should last until early June, though that’s not a guarantee. 

With the country’s $31.385 trillion borrowing limit on track to consume headlines during the coming months, here’s a rundown of what you need to know about the debt ceiling as Congress and the world economy head toward another fiscal cliff:

Q: What is the debt limit?

A: It gives the U.S. Treasury Department the ability to borrow money to pay for all the spending that Congress has approved, including the dozen annual government funding bills and mandatory spending programs that essentially run on autopilot, like Medicare, Medicaid and Social Security. 

Raising the debt limit does not authorize or appropriate new federal spending, but allows Treasury officials to continue paying all the nation’s bills in full and on time. The U.S. government has debt because nearly every year the federal government runs a deficit, meaning it spends more than it brings in from taxes and fees. 

Q: What are extraordinary measures?

A: Once the U.S. government reaches the debt ceiling, the Treasury Department can use accounting maneuvers to give lawmakers more time to reach bipartisan, bicameral agreement on a debt limit bill. But the moves can add some uncertainty to financial markets the longer they go on, especially as Treasury gets closer to an actual default date. 

Extraordinary measures can include “suspensions and delays of some debt sales and auctions, underinvestment and disinvestment of certain government funds, and exchange of debt securities for debt not subject to the debt limit,” according to a Congressional Research Service report. 

Q: What does Congress have to do with the debt limit?

A: Whenever the federal government approaches the debt limit, Congress must pass new legislation to allow the U.S. Treasury Department to continue borrowing to meet all the country’s financial obligations. Read more