Yellen 'nervous' about US defaulting on its debt: Axios
The United States Treasury Secretary says it would be devastating and a catastrophe for the US to default on its debt.
United States Treasury Secretary Janet Yellen revealed that she feels "nervous" about the US defaulting on its debt, warning that Americans would likely face a recession if Congress doesn’t raise the debt ceiling this summer, Axios reported on Saturday.
"Of course, it makes me nervous," Yellen told Axios in Johannesburg, South Africa, at the end of a 10-day trip across the continent. "It would be devastating. It's a catastrophe."
According to the Treasury Secretary, in the event of a default, "we’ll have a financial crisis," adding that she believes the United States “would have a recession."
Yellen explained that "Spending would have to decline to match the tax revenues," which would deprive the government of any ability to improve the economy with stimulus.
She continued that then fear might run loose, making consumers scared to spend, due to what she called "psychological consequences" that "could further impact spending and deepen a recession."
"Americans would face higher borrowing costs, and it would cause a good deal of turmoil globally as well," she warned.
Yellen pointed out that "The president and the leadership of Congress are responsible to find a way to get the debt ceiling raised."
Last week, the Treasury Department announced that it has begun taking extraordinary measures to avoid a government debt default by temporarily suspending payments that are not immediately required for essential programs or to keep the government running.
Yellen warned that the US national debt is approximately $31.46 trillion, warning that if Congress does not address the debt limit soon, the country risks triggering a recession or a global financial crisis. If Congress fails to raise the limit, the US will automatically default on its payments, obstructing basic US government functions.
US House Speaker Kevin McCarthy was shut down on Wednesday by President Joe Biden, who refused to participate in discussions on putting a ceiling on state debt.
McCarthy called Biden "irresponsible" and warned that this would lead to magnified financial risks.
According to the White House, Biden is expected to meet with McCarthy as part of a campaign to persuade the Republican-majority lower chamber of Congress to go against their word and allow additional spending.