Yellen to Congress: Abolish debt limit or US will default on trillions of dollars of debt
US Treasury Secretary Janet Yellen has called on Congress to abolish the “very destructive” federal debt limit, saying otherwise the United States risks default on trillions of dollars of the national debt.
In congressional testimony on Thursday, Yellen argued if certain measures are not taken by Congress in this regard the US Department of Treasury “might be unable to pay the bills.”
“When Congress legislates expenditures and puts in place tax policy that determines taxes, those are the crucial decisions Congress is making,” Yellen said during a hearing before the House Financial Services Committee, where she appeared beside Federal Reserve Chair Jerome Powell.
“And, if to finance those spending and tax decisions, it's necessary to issue additional debt, I believe it's very destructive to the president and myself, the Treasury secretary, in the situation where we might be unable to pay the bills that result from those past decisions.”
Yellen’s call to abolish the debt limit comes with nearly three weeks before the Treasury Department is on track to run out of cash and default on the national debt.
She told lawmakers on Tuesday that the US would default by Oct. 18 without action to raise the debt ceiling.
“At that point, we expect the Treasury would be left with very limited resources that would be depleted quickly. It is uncertain whether we could continue to meet all the nation's commitments after that date,” Yellen said.
Congress has so far failed to raise America’s $28 trillion debt ceiling amid a standoff between Democrats and Republicans, who have refused to support raising or suspending the current ceiling.
Yellen has said that the crisis triggered by default “would compound the damage of the continuing public health emergency,” plunge the US economy back into recession and leave it a “permanently weaker nation.”
She also described economic damage that would fall on consumers through higher borrowing costs and lower asset prices.
Democrats have tried to insist Republicans work with them to raise or suspend the debt limit.
"It should be bipartisan in recognition of the fact that both Republican administrations and congresses and Democratic ones have run budget deficits for most of the post-[World War II] period with only a few years serving as an exception," Yellen said on Thursday.
"That requires on a regular basis raising the debt ceiling," she continued. "The need to do so has nothing to do with future spending or tax plans.”
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