Sec. Yellen: If We Don’t Raise Debt Limit We’d Experience ‘Recession, Millions of Jobs Would Be Lost’
New deal with Senate Republicans only delays catastrophe
Senate Democrats have signed on to a temporary deal with Republicans to raise the debt ceiling — and avoid potential economic calamity for now — although the arrangement is just that: temporary, and Democrats may well find themselves scrambling once again.
And Treasury Secretary Janet Yellen Wednesday reminded Americans just what will be at stake.
Led by Senate Minority Leader Mitch McConnell, Senate Republicans had been adamant about not raising the federal debt ceiling in anger over a sweeping spending package Democrats intend to enact over Republican objection, using a budget process known as “reconciliation.”
McConnell flinched late Wednesday and offered a deal — accepted by Democrats — just to raise the debt ceiling by only a specific amount to allow the government to meet its obligations through December.
Democrats will have to find a longer term option by then, because, as Yellen explained Wednesday, the nation will once again be at the precipice.
“And as we’ve seen in the past and as this group knows, even delaying action can cause harm to business and consumer confidence, raise borrowing costs, disrupt financial markets, and cause a downgrade of the U.S. credit rating,” said Yellen. “Second, let me be clear, this would be a catastrophic outcome and this catastrophe would occur on two dimensions. The first relates to the financial system and macro economy. If Congress does not take action to raise the debt limit, Treasury’s cash balance will reach an insufficient level to pay the nation’s bills and America would default for the first time in history. Default will call into question the full faith and credit of the United States.
“Our country would likely face a financial crisis, causing interest rates to rise quickly and restricting access to credit. Our fragile recovery would be thrown into reverse. We would likely experience a recession, millions of jobs would be lost, and the pain would endure well past the resolution of the crisis,” she added. “The second catastrophe would be borne by wealthy Americans who directly receive any sort of payment from the federal government, every Social Security beneficiary, every family receiving a child tax credit, every military family waiting for a paycheck, or small business owners receiving a federal loan. They’re all at risk. Millions are without sufficient savings to forgo an expected check, and for these households and businesses the impact would be devastating.”
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