Washington, May 16, 2023 (Swiss Info). – United States Secretary of the Treasury, Janet Yellen, on Tuesday demanded that Congress agree to reach a deal with the Joe Biden-led government to avoid the debt ceiling. A “catastrophe” for the world’s leading economy.
In a speech at a meeting of the Independent Banking Community of America (ICBA), Yellen said, “If Congress does not address the debt ceiling, there is no good alternative that the Treasury or the government can use to save us from disaster. ”
This, he said, would be an “economic and financial” catastrophe that would “reverse” the economic recovery achieved in recent years and even cause the United States to go “further backward”.
Biden plans to meet with congressional leaders this afternoon to try to reach an agreement on the debt ceiling before traveling to Japan this Wednesday to attend the G7 summit, though the situation with Republicans is very different. And it doesn’t seem like it. It is possible that this could be a compromise.
In her speech, Yellen said the crisis was “entirely avoidable” and recalled that since 1960, Congress has raised or suspended the debt ceiling 80 times under both Democratic and Republican administrations.
“Congress should do it again. Raising or suspending the debt limit does not authorize the federal government to increase spending. It allows you to meet existing (spending) commitments,” Yellen insisted.
The current debt limit of $31.4 trillion was already reached on 19 January. Therefore, the government is currently drawing on its reserves to pay off the loans it has taken.
The Treasury Department estimates that these reserves will be depleted by June 1, although Yellen acknowledged on Tuesday that it is “impossible to predict” the exact moment in which it will be impossible for the US government to continue making payments.
As soon as this happens, the US will automatically suspend payments, a first in its history.
From time to time, the United States faces default on the national debt because, unlike other countries, its executive can only issue debt up to limits established by Congress, which has the power to suspend that limit. as he sees fit.
Currently, Republicans control the US House of Representatives and are trying to force Biden to negotiate cuts to social programs in exchange for suspending the debt ceiling.
