If legislators don’t take action to increase the borrowing threshold, Treasury Secretary Janet Yellen forewarns that the U.S. will be thrust into a catastrophic debt crisis and an intensifying recession – a scenario so dire she described it as “devastating” in her recent interview with Axios from Johannesburg, South Africa.
The US Reached Its Borrowing Limit
The U.S.’s financial capacity had hit its maximum limit of $31.4 trillion at the start of the month. Still, thanks to Treasury Secretary Jenet Yellen’s adept maneuvering, America can pay its debt until sometime in June. However, before that date comes around, Congress must agree on raising or suspending the debt ceiling so it can obtain more funding and pay off existing expenses.
Despite efforts from both sides of the aisle, leaders appear to be far apart on a compromise. The White House and many Democrats are pushing for expeditious passage to raise the debt ceiling; however, Republicans remain steadfast in their demand for spending cuts before agreeing to increase borrowing capacity.
Janet Yellen: A Debt Default Would Lead to an Economy Crisis
As negotiations remain unresolved between lawmakers, Jenet Yellen is gravely warning of the disastrous effects a debt default could have on the American and global economy. According to her interview with Axios, she indicated that it would lead to an “unimaginable financial crisis,” and without new borrowing capabilities, all chances of economic recovery stimulus plans would be demolished. Consumer spending levels may decrease exponentially as people lose faith in their country’s ability to stabilize its finances.Yellen, however, has made it her mission to notify the world of the risks involved with a potential debt default. In an interview with a news outlet, she stated, “it is up to President and Congressional leaders to devise a scheme for raising the debt ceiling.” Yellen believes strongly enough in words and through action, demonstrating her commitment to this crucial issue.
