US Secretary warns of consequences if government defaults

The US Treasury Secretary warned that a government default could cause millions of Americans to lose their income, causing severe economic consequences.

"Time is running out. Every day that Congress fails to act increases the cost and risks weakening the U.S. economy," U.S. Treasury Secretary Janet Yellen said today. "The U.S. economy is on the line. So are the livelihoods of millions of Americans. There is no time to waste. Congress must act as soon as possible."

Ms. Yellen's comments come as the Biden administration and Congress are at an impasse in negotiations to raise the debt ceiling. The US hit the $31.4 trillion debt ceiling set by Congress in January, forcing the Treasury Department to take extraordinary measures to keep the government running.

On May 15, Ms. Yellen once again warned that the US could default on June 1, increasing pressure on Republicans in Congress and the White House.

“Our economy would be plunged into an unprecedented economic and financial storm,” she said, adding that some 66 million people who receive monthly benefits would lose their payments. “And the resulting income shock could lead to a recession, destroying American jobs and businesses.”

US Treasury Secretary Janet Yellen holds a press conference in Niigata Prefecture, Japan, May 11. Photo: AFP

Raising the debt ceiling, or the limit on how much the government can borrow to pay for its expenses, is a regular occurrence. Republicans, who took control of the House of Representatives after the 2022 midterm elections, have said they will only agree to raise the debt ceiling if it is accompanied by major cuts to government spending.

A meeting between President Biden and House Speaker McCarthy, Senate Minority Leader Mitch McConnell and several bipartisan members at the White House on May 9 failed to produce a breakthrough. The parties are scheduled to continue meeting at 3 p.m. today (2 a.m. May 17, Hanoi time).

The meeting comes a day before President Biden begins a trip to Asia. The White House said on May 15 that Biden will attend the G7 summit in Japan, with stops in Papua New Guinea and Australia.

House Speaker McCarthy said meetings with aides were “not productive” and negotiations were “not going well.” Commenting on Biden’s trip, McCarthy said the president should focus on finding solutions for the US because it “reflects his values and priorities.”

Nhu Tam (According to Reuters, AFP )

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