Secretary of the Treasury Janet Yellen testified at the Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act at the Hart Senate Office Building in Washington, DC, U.S., September 28, 2021.
Kevin Deitch | Reuters
Financial Secretary Janet Yellen The Speaker of the House of Representatives, Nancy Pelosi, told on Tuesday that Congress has less than three weeks to resolve the looming debt ceiling and avoid an almost definite economic disaster.
“We now estimate that if Congress does not take action to raise or suspend the debt limit before October 18, the Treasury Department may exhaust its special measures,” she said. Wrote in a letter. “By then, we expect that the resources of the Ministry of Finance will be very limited and will be exhausted soon.”
Yellen will testify in the Senate later on Tuesday morning. Warning in a separate statement to lawmakers Failure to suspend or increase the debt limit will cause the United States to default for the first time and have serious consequences for the U.S. economy.
“Congress must quickly resolve the debt ceiling issue. If it does not, the United States will default for the first time in history,” she said in a speech to the Senate Banking Committee. “The full confidence and credibility of the United States will be damaged, and our country is likely to face a financial crisis and economic recession.”
Senate Minority Leader Mitch McConnell (R-Ky.) vetoed Schumer’s motion late on Tuesday, which allowed Democrats to resolve the debt ceiling with a simple majority. It needs unanimous support.
This move will allow Democrats to bypass Republican obstruction bills and suspend or raise the ceiling in the absence of a Republican vote.
Since the United States has never had a debt default before, economists must rely on predictions and guesswork when trying to estimate the economic impact of a default. Nevertheless, most economists said that such a default will bring financial disaster, and in the case of soaring interest rates, it may trigger a wide-ranging market sell-off and economic downturn.
“If you don’t raise the debt ceiling, you would expect interest rates to soar,” Yellen said in a live testimony on Tuesday. “I think there will be financial crises and disasters. Of course, interest payments on government debt will increase.”
Yellen’s letter to Pelosi, California is the latest in a series of communications between the U.S. Treasury Secretary and the leadership of Congress because the United States is almost unable to pay its debtors. A spokesperson for the Speaker of the House of Representatives did not respond to a request for comment.
Pelosi and Senate Majority Leader Chuck Schumer, DN.Y., have called on Republicans in recent weeks to suspend the debt ceiling as a bipartisan duty.
“Now, when minority leaders McCarthy and McConnell are welcoming a disaster that they all know is coming, Republican celebrities, former Treasury secretary, business groups and top economists are joining more and more Americans asking them Stop the call to put politics above the health of the United States. The economy,” Pelosi’s office said last week before Yellen’s latest letter.
Senate Republicans Monday Blocked a bill that would fund the government And suspend the borrowing limit in the United States. The Republicans oppose the bill approved by the House of Representatives because it includes a provision to suspend the debt ceiling. Republicans believe that this task should be done by the Democrats alone.
Later on Tuesday morning, McConnell responded to Yellen’s latest warning to Congress.
He said in the Senate: “If Democrats want to use fast-track, partisan procedures to add trillions of dollars to inflationary socialism, they will have to use the same tools to deal with debt limits.”
The Republican leader added: “It’s time for our democratic colleagues to stop procrastinating and start acting.” “But the Democrats in Congress don’t seem to be taking any urgent action.”
Republicans hope that Democrats will raise or suspend the debt ceiling by adding a clause to their $3.5 trillion settlement bill.
Government funding and debt ceilings are different issues.
If lawmakers fail to approve new funding or appropriations bills, the US government will shut down at the end of September. In this case, government agencies must send thousands of federal employees home and operate with limited capacity until funding is restored.
The debt ceiling is seen as a greater economic threat, because failure to suspend or increase the US borrowing limit will lead to the first default and unspeakable economic damage.
Raising or suspending the debt ceiling does not authorize new federal spending, but allows the Treasury Department to fulfill debts that have already been incurred during the Trump and Biden administrations. Even if the Biden administration does not pass a new spending plan in 2021, lawmakers will still have to raise or suspend the ceiling.
Republicans approved three such debt ceiling increases or suspensions during the Trump administration. In this case, the national debt increased by approximately $8 trillion.