US Treasury yellen: default would “permanently” weaken America

U.S. Treasury Secretary Janet Yellen testifies before the Senate Appropriations Subcommittee on Financial Services regarding the Treasury Budget Request for Fiscal Year 22 at Capitol Hill in Washington, DC, United States, on June 23, 2021. Shawn Thew / Pool via REUTERS

WASHINGTON, Sept. 19 (Reuters) – US Treasury Secretary Janet Yellen on Sunday appealed again to Congress to raise the federal debt ceiling, arguing that a US debt default would trigger a financial crisis historical.

In a Wall Street Journal opinion piece, Yellen said the crisis triggered by a default would worsen the damage from the lingering coronavirus pandemic, upsetting markets and plunging the US economy back into recession at the cost of millions of dollars. jobs and a sustained rise in interest. rates.

“We would emerge from this crisis a persistently weaker nation,” said Yellen, noting that the solvency of the United States has been a strategic advantage.

Yellen did not offer a new timeline for a possible default, but described the economic damage that would be suffered by consumers due to higher borrowing costs and falling asset prices.

She previously said a default could occur in October, when the Treasury depletes its cash reserves and extraordinary borrowing capacity below the $ 28.4 trillion debt limit.

“We can borrow for less than almost any other country, and a default would put this enviable fiscal position at risk. It would also make America a more expensive place to live, as the cost of borrowing is higher. would fall on consumers, ”Yellen wrote. “Mortgage payments, auto loans, credit card bills – anything bought on credit would be more expensive after default. “

Republicans refused to support the lifting or suspension of the $ 28.4 billion. US Senator Bill Cassidy of Louisiana said earlier on NBC’s “Meet the Press” program that Democrats wanted to raise the borrowing limit to fund billions of dollars in spending on the “Democratic wish list.”

Yellen argued that the debt ceiling was meant to pay off past spending obligations, and said waiting too long to raise the debt ceiling can still cause damage, citing a debt ceiling crisis in 2011 which pushed the federal government to the brink of default which resulted in a downgrade of the credit rating. .

“This led to financial market disruptions that persisted for months. Time is money here, potentially billions of dollars. Neither delays nor defaults are tolerable.”

House Majority Whip Jim Clyburn on Sunday that Democrats may have to pass the debt ceiling hike without Republicans’ backing.

“I think we need to do what’s necessary and send a message to the American people who are trying exactly to destroy this great democracy that we hope to keep in place,” he told CNN.

Reporting by David Lawder and David Shepardson; edited by Diane Craft

Our Standards: Thomson Reuters Trust Principles.

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