US Treasury chief warns Congress against causing ‘economic disaster’

US Treasury Secretary Janet Yellen warned on Tuesday that a failure by Congress to raise the US government’s so-called “debt ceiling” could trigger an “economic disaster”. Reuters.

Janet YellenPhoto: Andrew Hornick/AP/Profimedia

During a meeting in Washington with representatives of the American business community, Yellen said that it would lead to job losses at the same time as raising key interest rates at the Bank of America, the US Federal Reserve. Increases payments on homes, cars and credit cards.

He insisted that raising or suspending the U.S. government’s debt ceiling, now at $31.4 trillion, is a “core responsibility” of Congress. Following the COVID-19 pandemic.

“A default would create an economic and financial disaster,” he said, adding that such a scenario would lead to a “permanent” increase in the interest rates at which the U.S. could borrow funds from the markets.

“If the debt ceiling is not raised, American businesses will face a worse credit outlook, and the government will be unable to pay military families and retirees who rely on Social Security.”

“Congress must vote to raise or suspend the debt ceiling. They must do this unconditionally. They shouldn’t wait until the last minute,” Janet Yellen stressed.

His comments came after he told members of the U.S. Congress in January that if President Joe Biden’s administration did not vote to raise the cap, it could only meet its payment obligations until early June.

New arguments on the US debt ceiling

Unlike most developed countries, the United States has a limit on the level of public debt it can achieve. As the U.S. government has spent decades requiring congressional approval, the cap must continue to be raised.

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In years when the White House, the executive arm of the U.S. government, and Congress, the federal legislature in Washington, are under different political control, negotiations to raise the debt ceiling are difficult and marked by political infighting, so Yellen’s warnings are nothing new.

A similar dispute between Republicans and Democrats happened two years ago, Yellen also warned At that time On the dangers of US default.

But this year’s conflict between President Biden’s Democratic administration and the Republican-controlled House of Representatives has caused more concern than usual, with neither side willing to compromise.

The situation has prompted insurers to charge the highest premiums in a decade to insure US debt.

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