The US economy is facing a potential crisis as the country’s debt limit approaches. US Treasury Secretary, Janet Yellen, has warned against defaulting on the country’s debt. She stated that it would undermine not only the American economy but also the world’s economies. Central Bank Governors and G7 Finance Ministers are discussing the issue at an ongoing meeting in Japan.
On Thursday, Yellen stated that, based on official estimates, the country could face default as early as June 1st. However, if Congress fails to act and allows bills to remain unpaid, it would result in a financial and economic catastrophe. President Joe Biden and Republican leaders have been locked in a battle over the debt ceiling for months. The President is pushing for Republicans to raise the debt ceiling without any conditions.
In addition, Kevin McCarthy, the House majority leader, has tried to utilize the default as a bargaining chip to secure reductions in spending. The debt ceiling has been raised by the US Congress a total of 78 times since 1960. Most of these increases took place during Republican presidencies, with three occurring during the previous Trump administration.
Former President Donald Trump has also weighed in on the issue, stating that Republicans should allow the country to default if the White House does not meet their demands. However, Yellen strongly disagrees, declaring that America should never default. She states that defaulting on the country’s debt would be tremendously damaging to the US and global economy. Thus, the officials should regard the notion as unthinkable.
Debt ceiling negotiations are ongoing, and another meeting is scheduled for Friday. Yellen has expressed hope that world leaders will be able to bridge the differences and avoid default.
According to her, repaying the debt is crucial to maintaining the stability of the US economy. On the other hand, defaulting on the country’s debt would lead to a sharp increase in interest rates and damage the country’s credit rating. It could even trigger a global financial crisis.
It’s obvious that the US economy is facing a critical juncture, and Congress must act swiftly to avoid default; Especially considering that such a course of action would have severe consequences for the country and the world. It is crucial for lawmakers to put aside their political differences and work toward a solution that safeguards the stability of the US economy.
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