US Treasury Secretary Janet Yellen on Saturday described the crisis over raising the US debt ceiling as “more difficult” than before, but still hopes a solution can be found to prevent the first debt default in US history.
Yellen told Reuters in an interview on the sidelines of a meeting in Japan of Group of Seven finance officials that she hoped to tell the US Congress within the next two weeks when exactly the Treasury will run out of money to pay government bills.
Yellen repeatedly appealed to Congress to agree to raise the $31.4 trillion federal borrowing ceiling to prevent an “economic and financial catastrophe” that would occur if the United States defaulted on its debt.
British Finance Minister Jeremy Hunt told reporters that the standoff between Yellen and Congress posed a “very serious” threat to the global economy.
“It would absolutely be devastating if America’s gross domestic product was derailed by no deal,” Hunt said on the sidelines of the Group of Seven meetings.
Yellen said her assessment last week that the Treasury Department might not be able to meet payment obligations by June 1 was consistent with a report released Friday by the Congressional Budget Office warning of a “grave risk” of default in the first two weeks of the year. next June.
US President Joe Biden insists that the constitutional duty of Congress requires that the debt ceiling be raised unconditionally to pay the expenses that were approved in advance, while the Republicans – who control the House of Representatives – want Biden to agree to significant budget cuts to ensure their approval.
Unlike most developed countries, the United States sets a ceiling on the amount it can borrow, and lawmakers must raise that ceiling periodically, because the government spends more money than it makes.--
Yellen says the first major confrontation over the debt ceiling since 2011 reflects the continued division of the United States into opposing sides after the presidency of Donald Trump.
“It is certainly not positive for relations, global standing and credibility. It may be more difficult this time, but I hope we will find a solution,” she added.
Yellen stated that it is a positive sign that “almost everyone” – in a meeting that Biden held with congressional leaders last Tuesday – would agree that it would be unacceptable for the United States to default on the debt.
Yellen said that Biden – who is expected to meet again with congressional leaders this week – still considers attending the G7 summit that will start next Friday in Hiroshima a priority, but she quoted him as saying that he may cancel the trip unless sufficient progress is made. to end the impasse.
Despite the debt ceiling battle, Yellen says she is still convinced that the Biden government has re-established US leadership in the world, noting that other leaders of the group are taking a completely different stance than they used to towards the Trump administration.
In a report this week, the bipartisan Policy Center said some Treasury officials considered that approach the most pragmatic and least damaging during the 2011 crisis.
“We shouldn’t talk about that,” Yellen said. “We should talk about raising the debt ceiling. Every plan has serious downsides.”