The United States Secretary of the Treasury, Janet YellenHe said on Saturday that the standoff over raising the US debt ceiling was “more difficult” than in the past, but added that he remained hopeful of finding a solution to avoid the country’s first default.
Yellen told Reuters in an interview on the sidelines of a meeting of finance officials from the Group of Seven (G7) in Japan that he hoped to update the US Congress in the next two weeks on exactly when the Treasury would run out of funds to pay government bills.
The US Treasury chief has repeatedly called on Congress to agree to raise the $31.4 trillion limit on federal borrowing to avoid the “economic and financial catastrophe” that would ensue if USA stop paying your debts.
British Chancellor of the Exchequer, jeremy hunttold the press that the situation posed a “very serious” threat to the world economy.
“It would be absolutely devastating if the United States (…) saw its GDP derailed by not reaching an agreement,” Hunt declared on the sidelines of the G7 meetings.
Yellen said that her estimate from last week that the Treasure may not be able to meet its payment obligations as of June 1 was consistent with Friday’s report from the Congressional Budget Office, which warned of “significant risk” of default in the first two weeks of June.
the democrat president Joe Biden insists that Congress has a constitutional duty to unconditionally raise the cap to finance previously approved spending. Republicans, who control the House of Representatives, want Biden to accept sweeping budget cuts to secure his deal.
Unlike most developed countries, the United States sets a maximum borrowing limit. Since the Government spends more than it enters, legislators must periodically raise that ceiling.
Polarization
Yellen said the first major showdown over the debt ceiling since 2011 reflected the continued polarization of the United States following the presidency of donald trump.
“It’s certainly not positive for relationships and standing in the world and credibility,” he said. “Maybe this time it will be more difficult, but I am hopeful that (…) we will find a solution.”
He added that it was a positive sign that, in the meeting organized by Biden with leaders of the Congress on Tuesday, “almost everyone” agreed that it would be unacceptable for the United States to default.
Biden, who is set to reconvene the group early next week, still makes it a priority to attend the G7 summit that begins in Hiroshima on Friday, Yellen said, though she said she could cancel the trip if there was not enough progress to end the stalemate.
Despite the debt ceiling fight, Yellen said she remained convinced that the Biden administration had restored the leadership of USA in the world and that other G7 leaders were grateful for having turned “the dial 180 degrees in relation to the Trump administration.”
He maintained that there were no good options for prioritizing payments in case of default, but conceded that it would be technically possible to process them one day at a time as revenue comes in, resulting in a kind of staggered default. Principal and interest payments are managed separately.
In a report this week, the Bipartisan Policy Center said some Treasury officials had viewed the approach as the most plausible and least damaging during the 2011 stalemate.
“We shouldn’t be talking about that,” Yellen said. “We should be talking about raising the debt ceiling. Every plan has serious drawbacks.”
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