(Washington) U.S. Treasury Secretary Janet Yellen called again on Tuesday for Congress to “vote to raise or suspend the debt ceiling,” and to do so “unconditionally,” as Republicans want to tie raising the ceiling to a decline in public spending.
The plan, presented April 17 by Republican House Speaker Kevin McCarthy, proposes a $4.5 trillion cut in public spending. In exchange, they undertake to raise the ceiling by 1.5 trillion dollars. If this level is not reached by March 31, 2024, then a new vote will be required to allow the debt to continue to increase.
So far, Republicans and Democrats have failed to agree on the subject, at the risk of seeing the United States having to default on its debt “possibly in early June”, Moody’s Analytics warned Monday.
However, a default, unprecedented in the history of the country, “would cause an economic and financial disaster”, underlined Ms. Yellen, during a speech delivered in California.
“Over the long term, a default would increase the cost of borrowing and our future investments would be substantially more expensive,” insisted the Treasury Secretary.
Under these conditions, “Congress must vote to raise or suspend the debt ceiling. He must do so without conditions. And he shouldn’t wait until the last minute,” hammered Janet Yellen.
The subject of a standoff between the White House and the House of Representatives, with a Republican majority, for several weeks, the question of the debt ceiling took a new political turn on Tuesday with the announcement of the candidacy of President Joe Biden for another term in 2024.
Kevin McCarthy reacted on Twitter saying that Mr. Biden seemed “focused on his own political future when he should be on the future of the United States”.
President “Biden should have announced that he was finally coming to the negotiating table to discuss raising the ceiling responsibly and thus avoiding the first flaw in our history.”
In early March, Federal Reserve (Fed) Chairman Jerome Powell pointed out that raising the cap was “the only timely way out that allows us to pay all our bills,” noting the risk otherwise. consequences “difficult to estimate” but which “could be extremely negative and cause long-term damage”.
On Monday, Moody’s Analytics estimated that McCarthy’s proposed plan could lead to a 0.6 percentage point decline in U.S. potential growth for 2024 as well as the destruction of 780,000 jobs.
The United States is one of the rare countries where Parliament votes on the one hand on the annual budget deficit, which mechanically increases the public debt, then on the setting of a ceiling, which is in fact regularly reached.
Since the early 1960s, the cap has been raised 78 times, according to the Treasury Department.
