U.S. Treasury’s Yellen: Debt default would ‘permanently’ weaken America

Washington, Sept. 20 (BNA): US Treasury Secretary Janet Yellen issued a new plea to Congress to raise the federal debt ceiling on Sunday, arguing that a US debt default would lead to a historic financial crisis.

In an opinion piece in the Wall Street Journal, Yellen said the crisis caused by default will exacerbate the damage from the ongoing coronavirus pandemic, turbulent markets and plunge the US economy back into recession at the cost of millions of jobs and a permanent rise in interest. rates.

“We will emerge from this crisis as a permanently weaker nation,” Yellen said, noting that US creditworthiness was a strategic advantage.

Yellen did not offer a new timeline for a possible default, but described the economic damage that could befall consumers through higher borrowing costs and lower asset prices.

She previously said default could occur during October when the Treasury will exhaust its cash reserves and extraordinary borrowing capacity below the $28.4 trillion debt limit.

“We can borrow cheaper than almost any other country,” Yellen wrote, “and default would jeopardize this enviable financial situation. It would also make America a more expensive place to live, as the higher cost of borrowing would fall on consumers.” “Mortgage payments, car loans, credit card bills – everything bought on credit will be more expensive after a default.”

Republicans refused to support raising or suspending $28.4 billion. US Senator Bill Cassidy of Louisiana said earlier on NBC’s “Meet the Press” that Democrats want to raise the borrowing cap to fund trillions of dollars in “Democratic Wish List” spending.

Yellen argued that the debt ceiling relates to paying off past spending commitments, and said that waiting too long to raise the debt ceiling could do damage, citing the 2011 debt ceiling crisis that pushed the federal government to the brink of default that prompted a credit rating downgrade. .

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“This led to months of financial market turmoil. Time is money here, potentially in the billions of dollars. Delays or defaults cannot be tolerated.”

House Speaker Nancy Pelosi, in a statement, cited Yellen’s previous statements on the issue, and noted that Congress addressed the bipartisan debt ceiling three times during the Trump administration.

“When we take the debt limit this month, we expect it to be bipartisan again,” Pelosi said.

However, House Majority Whip Jim Cleburne said Sunday that Democrats may have to pass raising the debt ceiling without Republican support.

“I think we have to do what is necessary and send a message to the American people exactly that they are trying to destroy this great democracy that we hope will remain in place,” he told CNN.

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