Treasury Secretary Janet Yellen On Tuesday, she said she believed the economy would be in recession if Congress did not address federal debt limits before the unprecedented default of US debt.
In an interview with CNBC, Yellen said, “We see October 18 as the deadline. Not paying government invoices is devastating because we are in a position to lack resources to pay government invoices. That’s it. “Squawk Box.. “
President Joe Biden called on Congress to file on Monday This week’s debt limits even avoid approaching near-certain economic turmoil. He is Republican and Senate minority leader Mitch McConnell, R-Ky. Has accused him of interfering with a bill that raises the borrowing limit through filibuster.
“We also fully anticipate that it will cause a recession,” Yellen added on Tuesday.
The Treasury Secretary warned Senate Chairman Nancy Pelosi (Democratic Party) and Senate Chairman Chuck Schumer (Democratic Party) for several weeks that the United States would be unable to meet its obligations around October 18. Suspend debt caps before that date or take the first-ever US default risk.
The Treasury is currently using so-called urgent special measures to repay US receipts since it reached its final debt cap at the end of July. Special measures allow the department to save cash and withdraw certain accounts without issuing new bonds.
However, these measures are temporary and are estimated to last only until mid-October, according to Treasury estimates.
Although the United States has never failed to pay the bill, economists have said that defaults have caused widespread damage through soaring interest rates, undermining confidence in Washington’s ability to meet future obligations on time. It says it could delay social security checks on 50 million older people.
Members of US armed services may also see their wages delayed as a result of defaults.
Neglect can also reduce the number of government bonds held by some countries and tempt them to weaken demand for the dollar, giving it an edge in China’s auction to replace the greenback as the world’s preferred currency. There is a possibility.
“US Treasuries have long been regarded as the safest asset on the planet,” Yellen said. “It partially explains the dollar’s readiness, and making it a problem by not paying any of our invoices that are due will have really devastating consequences.”
Parliamentarians on both sides of the political aisle recognize that debt caps must be raised. Otherwise, there is a risk of economic turmoil. But as of Tuesday morning, the two seemed far from compromise.
Republicans and Democrats disagree on how to raise their borrowing limits, each using this issue as a political club.
Republicans tired of Democratic overspending plans, Biden, Pelosi and Schumer should solve the problem alone by suspending trillions of dollars in social policy and climate change reconciliation bills It states.
The settlement allows the parties to pass a specific bill with a simple majority in the Senate, but unlike the usual 60-vote requirement, it is not affected by Republican filibuster. McConnell has revealed that members of his caucuses do not support efforts to raise the cap prior to the 2022 midterm elections.
“Since mid-July, Republicans have clearly stated that Democrats need to raise their debt limits themselves,” McConnell wrote to Biden on Monday. “Transpartisan is not a light switch that Pelosi and Schumer leaders may turn on to borrow money and turn off to use it.”
“For two and a half months, I just warned that debt restrictions would have to be dealt with alone, as your party wants to govern alone,” he added, referring to the reconciliation efforts. ..
If Republicans support their threat, Democrats may eventually be forced to include a cap suspension in their settlement bill.
Many in the party have been in the weeks since a large-scale legislation was prepared, with moderate Senator Joe Manchin (DW.Va.) And Kyrsten Cinema (D-Aliz).
Undermining that debate is the fact that the Democratic Party can choose to pass an independent bill and raise its borrowing limit with another settlement bill. That route will not require Republican voting and will allow moderate and progressive Democrats to work on a safety net package on their side.
Democrats may not like that option, as dealing with the cap by reconciliation forces the party to raise the limit rather than simply suspending it. Suspension allows the government to fluctuate new debt for a specific period of time, instead of capping it at a specific amount.
After the suspension expires, the new cap will be set at an increased level of outstanding debt by that date.
Republican Senator Pat Toomey wrote on Twitter Tuesday that he believed Democrats were worried about a debt limit of around $ 30 trillion.
Linking Democrats to such a huge number-a product of spending and tax cuts approved by both parties will create bad optics for the party during the 2022 midterm elections.
Janet Yellen says the United States will face a recession if Congress doesn’t act
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