2023-05-21 17:14:00
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Investing.com – Treasury Secretary Janet Yellen said Sunday that “hard choices” must be made about which bonds will not be repaid if the debt ceiling is not raised and the United States defaults on its debt.
Treasury data show that the US Treasury account is close to depleting, which is the stage before the government shutdown, meaning the treasury’s inability to afford not to raise the debt ceiling. This will result in some delays or defaults in the payment of some US government debts and bonds.
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Yellen reiterated her warning that the US could default on its debt as early as June 1, which she said could cause widespread “economic chaos”. She said there would be no good results if Congress failed to act.
“We’re focused on raising the debt ceiling, and there are going to be tough choices if that doesn’t happen,” she said in an interview with NBC’s “Meet the Press.”
And she continued, “There can be no acceptable results if the debt ceiling is not raised, regardless of the decisions we make.”
What do Republicans want?
Raising the debt ceiling is necessary for the government to cover spending commitments approved by Congress and the president in order to prevent default. Raising the debt ceiling does not allow for new spending, but House Republicans have said they will not raise the limit if Biden and lawmakers do not agree to cut spending in the future. As a result, the deliberations on Capitol Hill were tense.
Biden’s remarks
President Joe Biden said Sunday that Republicans “need to move from their extreme position” during a news conference before leaving the G7 summit in Japan. After negotiations stalled late Saturday, Biden said he planned to call House Speaker Kevin McCarthy, D-Calif., on his way back to Washington.
“It’s time for Republicans to accept that no bipartisan deal is made solely on their partisan terms,” Biden said.
McCarthy told reporters Sunday after arriving at the Capitol that he planned to speak to Biden “in the next hour,” adding that he was glad the president was back in the United States.
“I think he should move away from the socialist wing of the Democratic Party and represent America. That means both sides should have a middle ground,” McCarthy said. “I was there the whole time.”
What if America falls behind? Stagnation is the first danger
At the Independent Capital Community of America Summit on Tuesday, Yellen said the White House Council of Economic Advisers has found that a default could lead to an economic downturn as bad as the Great Recession, in which 8 million Americans lost their jobs and the stock market plunged in value. by about 45%.
She also pointed to a Moody’s Analytics report that found similar numbers with more than 7 million Americans out of work and $10 trillion in household wealth evaporating. Yellen also warned that breaching the debt ceiling could affect basic government services.
Biden said on Sunday that he believes a deal can be reached with the Republicans, but that is not certain. He said, “I cannot guarantee that they will not force default by doing something outrageous.”
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