During a meeting with business executives from California on Tuesday, Treasury Secretary Janet Yellen warned that if the United States fails to raise its debt ceiling, it will lead to an economic and financial crisis in the nation, as she urged lawmakers to act now, and not wait “until the last minute.”
The debt ceiling is a statutory limit placed on the US government’s ability to legally borrow funds to meet its financial responsibilities.
Yellen went on to warn that a default would cause a wave of job losses, and drive household payments on mortgages and credit cards up, sapping household incomes.
The Treasury Secretary concluded that is was just a basic responsibility of the Congress to either increase, or suspend the $31.4 trillion cap.
She added, “A default on our debt would produce an economic and financial catastrophe. A default would raise the cost of borrowing into perpetuity. Future investments would become substantially more costly.”
Yellen went on to argue that US businesses would see credit markets deteriorate, and military families and seniors on Social Security would likely not get their payments from the government.
She then urged, “Congress must vote to raise or suspend the debt limit. It should do so without conditions. And it should not wait until the last minute.”
Meanwhile the White House and the Republicans in Congress are at an impasse over raising the debt ceiling.
In the US House of Representatives, Speaker Kevin McCarthy proposed a plan which will raise the debt ceiling by $1.5 trillion, while cutting $4.5 trillion in government spending.
The White House is insistent that the two issues not be linked, and observers say it is likely the Democrat-run Senate will reject the proposed plan.
Meanwhile, McCarthy has focused his warnings on the fact that the US debt has become unsustainable, and is now a clear and present danger to the nation.
White House press secretary Karine Jean-Pierre has chimed in as well, saying that Republicans are threatening to trigger chaos within the US economy, and that they need to “stop playing games” and agree to simply advance a “clean” debt bill.
In January, the US Treasury Department issued a notice to Congress that it had begun “extraordinary measures,” which would allow the continuation of the government’s payments of its obligations until early June, since the United States had reached its $31.4 trillion debt limit. At the time, Yellen had issued a statement calling on lawmakers to “act promptly” to raise borrowing limits and avoid a default.
