Treasury Secretary Janet Yellen said on Tuesday that she believed a recession would occur if Congress did not meet its borrowing limits before the United States defaults.

In an interview with Squawk Box, Yellen said, “We consider October 18th as the deadline. We don’t pay government bills because we don’t have enough resources to pay government bills. It is devastating. “..

President Joe Biden on Monday called on Congress to raise this week’s debt limits and even steer clear of near-certain economic crisis. This is Republican and Senate Minority Leader Mitch McConnell, R-Ky. Accused him of interfering with a bill that increases the obstruction borrowing limit.

“We also fully anticipate that this will cause a recession,” Yellen added on Tuesday.

The Secretary of the Treasury warned for several weeks the President of the Senate Nancy Pelosi (Democratic Party) and the President of the Senate Chuck Schumer (Democratic Party) that the United States would be unable to fulfill its obligations around October 18. Suspend debt ceilings before then or take the first ever risk of US default.

The Treasury is currently resorting to so-called urgent “special measures” to repay US revenues since it reached its final debt ceiling at the end of July. Special measures allow the ministry to save money and withdraw certain accounts without issuing new bonds.

However, these measures are temporary and are only expected to last until mid-October, according to Treasury estimates.

Although the United States has never failed to repay the bill, economists said the defaults had caused widespread damage due to soaring interest rates, undermining confidence in Washington’s ability to be honest in your future obligations on time. He says he could delay Social Security checks on around 50 million seniors.

Members of the US armed forces may also see their salaries delayed due to defaults from the United States.

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Negligence can also reduce the number of government bonds held by certain countries and cause them to weaken demand for the dollar, giving it an edge in China’s auction to replace the greenback as the preferred currency of the country. world. There is a possibility.

“US Treasuries have long been considered the safest asset on the planet,” Yellen said. “That partly explains the dollar’s readiness, and making it a problem by not paying any of our owed bills will have truly devastating consequences.”

Parliamentarians on both sides of the political aisle agree that debt ceilings need to be raised. Otherwise, there is a risk of economic turmoil. But by Tuesday morning, the two seemed far from a compromise.

Republicans and Democrats disagree on how to increase their borrowing limits, each using the issue as a political club.

Tired of the Democrats’ overspending plans, Republicans say Biden, Pelosi and Schumer should solve the problem on their own by suspending trillions of dollars in social policy and climate change reconciliation bills. Declared.

The rulebook allows parties to pass a specific bill with a simple majority in the Senate, but unlike the usual 60-vote requirement, it is unaffected by Republican obstruction. McConnell has revealed that members of his caucuses do not support efforts to raise the cap ahead of the 2022 midterm election.

“Since mid-July, Republicans have made it clear that Democrats themselves need to increase their debt limits,” McConnell wrote to Biden on Monday. “Transpartisan is not a switch that the leaders of Pelosi and Schumer can turn on to borrow money and turn off to use it.”

“For two and a half months, I have just warned that the debt restrictions should be dealt with alone, because your party wants to govern alone,” he added, referring to the reconciliation efforts. ..

If Republicans back their threat, Democrats could potentially be forced to include a suspension of the cap in their settlement bill.

Many of the party members have been in the weeks since preparing for large-scale legislation, with moderate Sen. Joe Manchin (DW.Va.) and Kyrsten Cinema (D-Aliz).

Janet Yellen says US will face a recession if Congress doesn’t act

Source link Janet Yellen says United States will face a recession if Congress does not act