edited by: Shankhneel Sarkar
Last Update: January 14, 2023, 3:11 pm IST
Washington, United States
US Treasury Secretary Yellen urged the US House and US Senate to come up with a plan to avoid default (Image: Reuters)
There are fears that the US Treasury Department will have to resort to ‘extraordinary measures’ to avoid going into default
US Treasury Secretary Janet Yellen warned the US Congress that the country is projected to reach its debt limit on 19 January. Guardian said in a report.
He informed members of the House and Senate on Friday that his actions would buy the US Congress some time. Using that time, they could pass legislation that could extend the US’s $31.4 trillion borrowing authorization or suspend it for a certain period.
Lawmakers were urged to act quickly to raise America’s debt ceiling. She said this must be done to protect “the full faith and credit of the United States of America”.
Yellen said that failing to do so would cause ‘irreparable’ damage to the US economy and harm the livelihoods of all Americans and affect global financial stability.
The Biden administration and Wall Street are anticipating a 2003 fight over the debt ceiling. He pointed to the year 2011 where a similar situation occurred and the US credit rating was briefly downgraded and forced to cut domestic and military spending. , The Guardian Told.
Republicans are threatening to use the debt ceiling to demand spending cuts from Democrats and the White House. Washington Post A report says House Republicans have an emergency plan to breach the debt ceiling.
The proposal would direct the Treasury Department to prioritize certain payments if the US reaches the debt ceiling, the Washington Post Told.
House Speaker Kevin McCarthy said that he had a very good conversation with US President Joe Biden regarding the debt ceiling. “We don’t want to inflict any fiscal problems on our economy and we won’t, but fiscal problems will continue to be business as usual. We have to change the way we spend money,” McCarthy said, according to Washington.
Post.
The proposal would direct the Treasury Department to continue making interest payments on the loan. Washington Post said in his report. Payments for Social Security, Medicare and veterans benefits, as well as funding to the military, would continue under the proposed plan.
A default could push the country into a deep recession and this could happen at a time when global growth is slowing and economies around the world are facing high inflation due to COVID and the war in Ukraine. This can lead to a fall in the market and layoffs of lakhs of employees.
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