U.S. will hit its debt limit Thursday, Yellen warns Congress

Treasury Secretary Janet Yellen on Friday notified Congress that the U.S. will reach its statutory debt limit next Thursday.

After that, the Treasury Department will begin “taking certain extraordinary measures to prevent the United States from defaulting on its obligations,” Yellen wrote in a letter to House Speaker Kevin McCarthy, R-Calif.

While Treasury, “is not currently able” to estimate how long those emergency actions will allow the U.S. to pay for government obligations, “It is unlikely that cash and extraordinary measures will be exhausted before early June,” she wrote.

“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” Yellen wrote.

Friday’s notification from Yellen effectively starts a clock counting down how long the federal government can continue to make interest payments on its debt.

The so-call called extraordinary measures available to the Treasury secretary can free up billions of dollars that have been technically committed to other purposes, but not spent yet.

This can extend the clock for weeks or months while Congress hashes out a bill to raise the borrowing limit.

 A senior White House official told CNBC that the White House plans to try to cut a deal with Congress to raise the federal debt ceiling after the mid-April deadline for income tax return filings. The official said the White House will not have enough details to negotiate a deal until it sees the level of income tax receipts.

But the debate over raising the debt ceiling is expected to be particularly fraught this year in light of the new Republican majority in the House of Representatives.

McCarthy has made little secret of the fact that Republicans intend to demand massive spending cuts to the federal budget in exchange for approving an increase in the debt ceiling.

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