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Treasury Secretary Janet Yellen urges Congress to act ‘as soon as possible’
US Treasury Secretary Janet Yellen has warned that failing to raise the US debt ceiling could have disastrous consequences.
Without a deal to increase the amount the federal government can borrow, we could run out of money by early June.
At that point, the federal government may no longer be able to pay wages, benefits, and other payments.
“It is the job of Congress to do this. If Congress fails to do so, there will be economic and financial catastrophe, which we will cause ourselves,” she said.
In an interview with ABC News on Sunday, Yellen said the debt ceiling negotiations shouldn’t be done “with a gun at the American people’s heads.”
But the time for an agreement is drawing near.
On Tuesday, President Biden will meet Republican leaders and ask them to agree to raise the current $31.4 trillion (£25.12 trillion) limit.
Congress usually ties approval of higher debt ceilings to provisions on budgets and spending measures.
Last month, the House of Representatives passed a bill to raise the limit. This cap, which currently equates to almost 120% of the country’s annual economic output, is included in legislation that will wipe out spending cuts over the next decade.
President Biden wants Congress to agree to raise the debt ceiling unconditionally. President Biden said he will not negotiate a budget increase and will discuss budget cuts after the issue is resolved.
Ms Yellen said there could be a “constitutional crisis” if parties could not agree on the issue.
The Biden administration is considering whether it’s within the constitution for the president to continue issuing new bonds without congressional approval, but it will try to avoid that scenario this week.
“We shouldn’t go to the point where the president needs to consider whether he can continue to issue bonds,” Yellen told ABC. “This would be a constitutional crisis.”
The debt ceiling has been raised, extended, or amended 78 times since 1960, and negotiations have often stalled.
After all, the threat of non-payment of government payments, including debt obligations, always led to compromises. The United States has never defaulted on its debt. This is an event that will disrupt global financial markets and have far-reaching economic implications.
But Yellen said in a letter to Congress last week that delaying the resolution would also have negative consequences.
“From past debt ceiling deadlocks, waiting until the last minute to suspend or raise the debt limit would seriously damage business and consumer confidence, raise short-term borrowing costs for taxpayers, and hurt United’s credit. We have learned that it can negatively affect our rating status,” she wrote.
