Debt Standoff Risks 'Calamity' For Global Economy, Yellen Warns
US Treasury Secretary Janet Yellen said in an Associated Press (AP) interview Saturday she expects Congress will vote to raise the US debt limit, but demands by House Republicans for spending cuts in return for backing an increase are “a very irresponsible thing to do” and risk creating a “self-imposed calamity” for the global economy, Fatima Hussein reported for the Associated Press (AP).
Photo Insert: On the potential default, the Treasury Secretary said, that “would impose a self-imposed calamity in the United States and the world economy.”
The Biden administration and Republican lawmakers have been at loggerheads over how to increase the government’s legal borrowing capacity.
On Thursday, the government bumped up against the $31.381 trillion debt cap, forcing the US Treasury Department to take “extraordinary” accounting steps to keep the government running.
“It is possible for markets to become quite concerned about whether or not the US will pay its bills,” she said, pointing to the negative economic impacts of a debt showdown in 2011.
As for a potential default, she said, that “would impose a self-imposed calamity in the United States and the world economy.”
The Treasury’s extraordinary steps so far mean that the US government should be able to operate until some point in June, when the limit would need to be increased to avoid what could be significant economic damage, Josh Boak also reported for AP.
Yellen said she has not spoken with the US Rep. Kevin McCarthy, the newly elected Republican speaker of the House. McCarthy has yet to spell out the size and target of the spending cuts that he contends are needed to put the federal government on a healthier financial path.
President Joe Biden and administration officials have called for a “clean increase” — not linked to cuts — to the borrowing capacity, saying that the risks of an extended impasse could lead to a deep recession that would echo dangerously worldwide if faith is lost in the credit of the US government.