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Janet Yellen is worried that the US might face dire outcomes if they do not raise the debt limit. The US Treasury Secretary warned that if the federal government did not agree to increase what it can borrow, it could face money shortages by early June. In simple terms, the federal government could face challenges in making payments like welfare and wages. Janet clarified that Congress was responsible for the plan moving forward.
She insisted that if Congress disapproved the bill, it could cause a financial and economic catastrophe. In a recent interview with the media on Sunday, Janet said the debt discussions should not pose harsh conditions to American citizens. She said congress was running out of time to implement the next move. Meanwhile, president Biden has scheduled to meet Republican leaders on Tuesday to lure them into increasing the current £25.12tn ($31.4tn) debt ceiling.
Congress ties higher debt ceilings’ approval to stipulations of spending and budget measures. The House of Representatives approved a bill last month to increase the debt limit. It proposed about 120% of the US yearly economic output and sweeping cuts over the following ten years. generally, the US president wants Congress to increase the debt limit without conditions. Biden said the debt ceiling raise was non-negotiable and would discuss the budget cuts after approval.
On the other hand, Yellen insisted that if Congress failed to find a cross-party resolution, the matter could escalate into a constitutional crisis. Although the president strives to avoid a constitutional conflict, the Biden administration is opting for a constitutional scope for the president to change the debt ceiling without Congress's approval. Yellen cautioned that it would be challenging for the US economy and constitution if the president considers raising the debt ceiling without Congress's approval.
Overall, the United States has revised, extended, or raised the borrowing limit 78 times since 1960. The negotiations were successful and constitutional throughout this period. But the concern about a possible government payment default, such as debt obligations, has occasionally resulted in a compromise. In any case, the United States has never defaulted since it would have far-reaching economic impacts and might upend global financial markets.
In a letter to Congress, Yellen explained that delaying the resolution might also result in adverse economic effects. Above all, the US Treasury Secretary clarified that insights from past limit bills show that delaying the decision to increase or suspend the borrowing limit can have dire impacts on consumer and business confidence. It could also negatively impact the US credit rating and raise short-term debt costs.