US Treasury Secretary Janet Yellen warned on Saturday of catastrophic implications if the country’s statutory debt ceiling is not raised in the coming months. According to the senior source, the US could default on its debt by the summer, causing a financial crisis.
“Americans would face higher borrowing costs, and it would cause significant global turmoil,” Yellen said.
US Debt Ceiling
Earlier this month, the secretary began to raise the alarm about a potential US debt default, informing the US Congress that the Treasury had begun to use emergency measures to keep the US from exceeding the national debt ceiling, which is now set at $31.4 trillion.
Most of the actions entail temporarily halting payments that are unnecessary to keep the government working.
However, Yellen emphasized that the measures only go so far as to give Congress time to negotiate and pass a debt limit raise, which would most likely occur in early June. She predicted that without the raise, the country would default.
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Yellen:US Might Experience Minimum Decrease In Debt
While the recently implemented extreme measures are mostly accounting tactics, Yellen told Amanpour that the actual date at which we would no longer be able to utilize these measures is somewhat uncertain. However, it might happen as early as early June.
Yellen told CNN exclusively from Senegal that if the steps are exhausted, the US might see a minimum downgrade of its debt due to Congress’s failure to increase the debt ceiling.
She argued that if the federal government fails to make payments, the consequences might be as severe as a “global financial crisis.” Hardline Republicans have demanded that raising the debt ceiling be linked to expenditure cuts.
The White House has responded by stating that it will not make any compromises or negotiate a debt-ceiling increase. So far, Yellen’s warnings have failed to elicit bipartisan debate, with Republicans and Democrats repeating their hardline positions during the past week.
The agency aims to sell current investments and suspend reinvestments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund as part of the debt issuance suspension period utilizing extraordinary measures.
It will also halt the reinvestment of the Federal Employees Retirement System Thrift Savings Plan’s government securities fund. According to Yellen’s letter, no federal retirees or employees would be harmed, and the funds would be restored once the deadlock is resolved.
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