Treasury Secretary: US Faces Recession If Congress Does Not Address Debt Cap In 2 Weeks
The Secretary of the Treasury, Janet Yellen.
Photo: Andrew Burton / Getty Images
Treasury Secretary, Janet Yellen, said Tuesday that she believes that the economy would enter a recession if Congress does not address the federal government’s borrowing limit, before a default record of US debt.
“I believe that the 18 October is a deadline. It would be catastrophic not to pay the government bills, for us to be in a position where we don’t have the resources to pay the government bills, ”Yellen said during an interview. in CNBC’s “Squawk Box” .
A recession is a period of temporary economic decline during which trade and industrial activity decline, generally identified by a fall in Gross Domestic Product (GDP) in two successive quarters.
Biden blamed to Republicans and Senate Minority Leader Mitch McConnell , Republican of Kentucky, for standing in the way of the path of legislation that would lift the limit on loans, using an obstructionism.
The consequences for families and businesses would be equally as severe – including for 50 million seniors who receive Social Security, 30 million families who receive the Child Tax Credit and servicemembers who expect their paycheck on time.
– Secretary Janet Yellen (@SecYellen)
October 5, 2021
The Secretary of the Treasury warned for weeks the Speaker of the House of Representatives Nancy Pelosi and Senate Majority Leader Chuck Schumer , who The United States will no longer be able to pay its debts around 18 October, which forces to suspend the debt ceiling before that date or risk the first default in US history.
The Treasury Department is currently using so-called emergency extraordinary measures to pay American receipts, since it hit the last debt ceiling in late July. The extraordinary measures allow the department to conserve cash and withdraw certain accounts, without issuing new bonds.
But those measures are temporary and are only expected to last until mid-October, according to Treasury estimates.
The consequences can be disastrous
While the US has never left pay their bills, economists say a default would cause widespread damage through an increase in interest rates, it would tarnish faith in Washington’s ability to meet its future obligations on time and would potentially delay Social Security checks for some 50 million older adults .
Members of the Army could also see their payment delayed as a result of a default.
Inaction might also tempt some countries to have fewer Treasuries and weaken demand for the dollar, possibly giving China an advantage in its attempt to replace the dollar as the world’s preferred currency.
Lawmakers from both parties acknowledge that the debt ceiling must be increased or there is a risk of an economic recession. But the disagreement is on how to raise the debt limit, and each uses the issue as a political club.
