NIIGATA, Japan, May 13 (Reuters) – U.S. Treasury Secretary Janet Yellen said on Saturday that standoff over raising the U.S. debt ceiling is “more difficult” than in the past, but added that remains hopeful of finding a solution to avoid the country’s first default.
Yellen told Reuters in an interview on the sidelines of a meeting of Group of Seven (G7) finance officials in Japan that she hoped to update the US Congress in the next two weeks on exactly when the Treasury would run out of funds. to pay government bills.
The US Treasury chief has repeatedly called on Congress to agree to raise the $31.4 trillion federal borrowing limit to avoid the “economic and financial catastrophe” that would ensue if the United States defaults on its debts.
British Chancellor of the Exchequer, Jeremy Hunt, told reporters that the situation posed a “very serious” threat to the world economy.
“It would be absolutely devastating if the United States (…) saw its GDP derailed by not reaching an agreement,” Hunt declared on the sidelines of the G7 meetings.
Yellen said her estimate last week that the Treasury might not be able to meet its payment obligations as early as June 1 was consistent with Friday’s report from the Congressional Budget Office, which warned of a “risk significant” of default in the first two weeks of June.
Democratic President Joe Biden insists that Congress has a constitutional duty to unconditionally raise the cap to fund previously approved spending. Republicans, who control the House of Representatives, want Biden to accept sweeping budget cuts to secure his deal.
Unlike most developed countries, the United States sets a maximum borrowing limit. Since the Government spends more than it enters, legislators must periodically raise that ceiling.
POLARIZATION
Yellen said the first major showdown over the debt ceiling since 2011 reflected the continued polarization of the United States following the presidency of Donald Trump.
“It’s certainly not positive for relationships and standing in the world and credibility,” he said. “Maybe this time it will be more difficult, but I am hopeful that (…) we will find a solution.”
He added that it was a positive sign that, at the Biden-hosted meeting with congressional leaders on Tuesday, “almost everyone” agreed that it would be unacceptable for the United States to default on its payments.
Biden, who is set to reconvene the group early next week, still makes it a priority to attend the G7 summit that begins in Hiroshima on Friday, Yellen said, though she said she could cancel the trip if there was not enough progress to end the stalemate.
Despite the debt ceiling fight, Yellen said she remained convinced that the Biden administration had restored America’s leadership in the world and that other G7 leaders were grateful for turning “the dial 180 degrees in relationship with the Trump administration.
He maintained that there were no good options for prioritizing payments in case of default, but conceded that it would be technically possible to process them one day at a time as revenue comes in, resulting in a kind of staggered default. Principal and interest payments are managed separately.
In a report this week, the Bipartisan Policy Center said some Treasury officials had viewed the approach as the most plausible and least damaging during the 2011 stalemate.
“We shouldn’t be talking about that,” Yellen said. “We should be talking about raising the debt ceiling. Every plan has serious drawbacks.”
(Reporting by Andrea Shalal in Niigata; Editing in Spanish by Ricardo Figueroa)
Source: Ambito
