Yellen issues ‘critical’ warning for global economy as US hits debt ceiling this week

Washington: US Treasury Secretary Janet Yellen has informed Congress that the US is expected to hit its debt ceiling next Thursday and then take “extraordinary measures” to avoid a default.

In a letter to House and Senate leaders on Friday, Yellen said her actions would buy time before lawmakers can pass legislation that either increases the nation’s $31.4 trillion borrowing power or does it again for one be suspended for a certain period of time. But she said it was “crucial that Congress act in a timely manner.”

“Failure to meet government commitments would irreparably damage the US economy, the livelihoods of all Americans and global financial stability,” she said.

Warning: US Treasury Secretary Janet Yellen.

Warning: US Treasury Secretary Janet Yellen.Credit:AP

“In the past, even threats that the US government might default on its commitments have done real harm, including the only credit downgrade in our nation’s history in 2011,” she said. Yellen was referring to the impasse on the debt ceiling during Barack Obama’s presidency, just as Republicans had also just won a majority in the House of Representatives.

In this new Congress, the debt ceiling debate will almost certainly spark a political showdown between the newly empowered Republicans, who now want to control the House of Representatives and cut spending, and President Joe Biden and the Democrats, who have maintained single-party control for the past two years had enjoyed over Washington years.

The White House has insisted it will not allow the nation’s creditworthiness to be subdued to Republican demands.

“We have seen both Republicans and Democrats come together to address this issue,” White House spokeswoman Karine Jean-Pierre told reporters. “It’s one of the basic things that Congress has to deal with and it should be done unconditionally.”

Treasury Secretary Janet Yellen's letter to House Speaker Kevin McCarthy.

Treasury Secretary Janet Yellen’s letter to House Speaker Kevin McCarthy.Credit:AP

Republican leaders in the House of Representatives liken the debt ceiling to a credit card limit and have said they would only raise the legal limit if it also ensures a spending overhaul. Yellen issues ‘critical’ warning for global economy as US hits debt ceiling this week

Callan Tansill

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