2023-05-11 15:57:06
© Reuters.
By Andrea Shalal
NIIGATA, Japan (Reuters) – U.S. Treasury Secretary Janet Yellen called on Congress on Thursday to raise the $31.4 trillion federal debt limit and avoid an unprecedented default that would trigger an economic slowdown. global economy and would threaten to undermine the United States’ global economic leadership.
Yellen issued the latest in a series of increasingly stern warnings in prepared remarks for a news conference ahead of a meeting in Japan with her Group of Seven (G7) counterparts, as well as India, Indonesia and Brazil.
“A default would threaten the gains we’ve worked so hard to make in recent years in our recovery from the pandemic. And it would trigger a global slowdown that would set us back much further,” she said. “It would also risk undermining US global economic leadership and raise questions about our ability to defend our national security interests.”
US President Joe Biden said on Wednesday that Congress’ failure to act before the Treasury runs out of money to pay government bills – something that could happen as early as June 1 – could send the US economy to a recession.
Yellen asserted that Republican temerity on the issue amounted to a “crisis of our own making” and that only the threat of a default could lead to a downgrade of the US government’s credit rating, as it did during a dispute over the debt ceiling. in 2011.
That could raise interest rates on mortgages, car payments and credit cards, Yellen said, noting that rates were already rising on debt maturing around June 1.
The US economy would take a “substantial” hit if the Treasury is no longer able to issue debt, not to mention the impact on financial markets and institutions and consumer confidence, she said, calling the prospect “unthinkable”.
“All these analyzes show that we would be in – if this lasts for a significant period of time – in a very substantial downturn,” she said.
Biden, a Democrat, insists Congress has a constitutional duty to raise the debt ceiling, which reflects federal money previously spent, without conditions. But Republicans who control the House of Representatives have tied any increase in the debt limit to sweeping budget cuts.
The US president said this week he may have to skip traveling to Hiroshima to meet G7 leaders next week, depending on developments in the debt ceiling impasse. Biden is due to meet top Democratic and Republican congressional leaders again on Friday after a kickoff meeting on Tuesday.
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