Yellen told Reuters in an interview on the sidelines of a meeting in Japan of G7 finance officials that she hopes to let the US Congress know within the next two weeks when the Treasury will run out of money to pay government bills. .
Yellen has repeatedly called on Congress to agree to raise the federal borrowing limit by $31.4 trillion to avert an “economic and financial catastrophe” that would occur if the United States failed to repay its debts.
Britain’s Finance Minister Jeremy Hunt told reporters the standoff between Yellen and Congress posed a “very serious” threat to the global economy.
“It would be absolutely devastating if America’s gross domestic product…was derailed by any deal,” Hunt said on the sidelines of Group of Seven meetings.
Yellen said his estimate last week that the Treasury Department may not be able to meet its payment obligations by June 1 is consistent with a report released Friday by the Congressional Budget Office warning of a “serious risk” of default in the first two weeks of June.
President Joe Biden, a Democrat, insists Congress has a constitutional duty to raise the debt ceiling unconditionally to pay for previously approved spending. While Republicans, who control the House of Representatives, want Biden to agree to deep budget cuts to gain their approval.
Unlike most developed countries, the United States caps the amount it can borrow. Legislators must raise this ceiling periodically, as the government spends more money than it earns.
Yellen says the first major showdown over the debt ceiling since 2011 reflects the continued division of the United States into opposing camps following Donald Trump’s presidency.
“It’s definitely not good for relationships, global reputation and credibility,” she added. “Maybe this time it will be more difficult, but I hope… we will find a solution,” she added.
Yellen said it was a positive sign that “almost everyone” at a meeting Biden held with congressional leaders on Tuesday would agree that it would be unacceptable for the United States to default on the debt.
Yellen said Biden, who is expected to meet congressional leaders again this week, still considers attendance at the G7 summit that begins next Friday in Hiroshima a priority, but she quoted him as saying he may cancel the travel unless enough progress is made to end the stalemate conflict.
Despite the debt ceiling battle, Yellen says she still believes the Biden administration has restored American leadership in the world, noting that the group’s other leaders are taking a completely different stance than they had toward the Trump administration. .
In a report this week, the bipartisan Policy Center said some Treasury officials viewed this approach as the most realistic and least damaging during the 2011 crisis.
“We shouldn’t talk about it,” Yellen said. “We should be talking about raising the debt ceiling. Every plan has serious downsides,” she added.
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