Treasury secretary said the current arrangement is ‘disastrous’ and presents a risk to economic stability
With the federal government days from its first lapse in US history, Treasury Secretary Janet Yellen argued Thursday that Congress should eliminate borrowing limits altogether to prevent similar risks in the future.
Testifying before the House Financial Services Committee, Yellen said she would support eliminating the limit through legislation. The Treasury secretary said the current system is “disastrous” and presents a risk to economic stability.
“I believe that when Congress legislates expenditures and creates tax policy that sets taxes, these are important decisions that Congress is making,” Yellen said. “And if it is necessary to issue additional debt to finance those spending and tax decisions, I believe it is very disastrous to have the president and myself as the Treasury secretary, in a situation where we are dealing with bills. May be unable to pay. Those old decisions.”
McConnell blocks Schumer bid to raise loan limit on majority basis
Under the current system, Republicans and Democrats hold regular votes to raise the debt limit, clearing the way for the government to meet its outstanding obligations. The current US federal debt is $28.4 trillion.
Republicans this week blocked several Democrat efforts to raise the debt limit, with GOP leaders saying they would not cast votes that would facilitate costly progressive-backed social spending programs.
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Earlier this week, Yellen warned that US cash reserves would run out without a suspension of borrowing limits by October 18, putting the government at risk of defaulting on its loans. The Treasury secretary and other economic officials have warned that a failure to raise the debt limit could fuel global economic instability and plunge the country into a protracted recession.