DAKAR, Senegal (TBEN) — U.S. Treasury Secretary Janet Yellen said in an interview with the The Bharat Express News Saturday that she expects Congress to eventually vote to raise the U.S. debt limit, but demands from House Republicans for cuts in exchange for supporting a hike is “a very irresponsible thing to do” and risk creating a “self-imposed disaster” for the global economy.
The Biden administration and Republican lawmakers have disagreed on how to increase the government’s legal borrowing capacity. On Thursday, the government hit the $31.381 trillion debt ceiling, forcing the US Treasury Department to take “extraordinary” accounting steps to keep the government afloat.
Asked in the interview, conducted during her trip to Africa, about such talk of withholding approval for a higher debt limit unless there are associated cuts, Yellen called that position “a deeply irresponsible act” and said it could even have dire consequences. to have. before “the day of judgment.”
“It is possible that the markets are very concerned about whether or not the US will pay its bills,” she said, pointing to the negative economic consequences of a debt run-off in 2011.
As for a possible default, she said, which would “create a self-imposed disaster in the United States and the global economy.” The Treasury’s extraordinary measures so far mean the US government should be able to operate until sometime in June, when the limit would need to be raised to avoid what could be significant economic damage.
Yellen said she has not spoken to US Representative Kevin McCarthy, the newly elected Republican Speaker of the House. McCarthy has yet to specify the size and purpose of the cuts he believes are necessary to put the federal government on a sounder financial path.
President Joe Biden and administration officials have called for a “clean increase” – not tied to spending cuts – in borrowing capacity, saying the risks of a prolonged deadlock could lead to a deep recession that would reverberate dangerously worldwide if confidence in the credit from the US government.
“Congress needs to understand that it’s about paying bills already incurred through decisions made with this and previous Congresses and not new spending,” Yellen said. She said she is convinced that government debt levels should be sustainable, “but it is non-negotiable whether we are going to pay our bills or not.”
Despite the dire warnings, Yellen said she believes the situation will eventually be defused as lawmakers can see the escalating danger if the federal government were unable to pay all of its bills: collapsing financial markets, massive layoffs and an economic downturn. downturn that could jeopardize the US economy. place in the world hierarchy.
“I believe eventually we will find a way around this,” Yellen said.
The Treasury Secretary said the White House and officials from her department are “meeting to discuss possible ways forward. And we will have conversations with members of Congress to try to understand what they see as a path forward.”
The White House said Friday that Biden “looks forward” to sitting down with McCarthy to discuss a range of topics. But the statement came without an invitation or a date for a meeting.
Yellen said the administration’s position remains not to negotiate the debt limit, but she did not give details of possible strategies being discussed in the White House to ensure the ceiling is raised.
“Congress has to do it,” she said. “It has to happen. It can’t be something that depends on budget cuts.”
Yellen sat down for the interview on Saturday during a trip that spanned the entire continent, meeting her Chinese counterpart in Switzerland before heading to Senegal, Zambia and South Africa.
The Biden administration is trying to voice its support for improving the economies of African countries, many of which have young populations that will ultimately make those countries the drivers of growth in the coming decades. Speaking at an African nation summit held in Washington last month, Biden said he would visit the continent this year as a sign of a desire to increase engagement with the United States.
Prior to the interview, Yellen went to Senegal’s Goree Island, where he visited a building known as the House of Slaves, which was a center for the Atlantic slave trade that defined much of American history.
The economist and former chairman of the Federal Reserve has emphasized her desire to reduce racial and income inequality, part of the systemic racism linked to slavery and the aftermath of segregation. For Democrats, how to bridge that gap is not only a question of social justice, but also of political pragmatism, as black voters are an important constituency for winning elections.
Yellen said the government has not moved to reparations — payments and other programs intended for the descendants of slaves — to address inequality.
“The government has not embraced reparations as part of the response,” Yellen said, adding that “we have a program to try to address these issues that involves a lot of positive steps and adjustments and more opportunities.”
America is trying to address African countries on moral terms, saying that US aid and loans will be transparent and fair in a way that Chinese investment has not been.
Relations between the US and China – the world’s two largest economies – have taken on an increasingly hostile character amid the geopolitical ramifications of the China-Russia friendship, the persistence of the coronavirus and an era of open globalization that has given way for national security priorities.
The past two US presidential administrations have challenged China’s trade practices, with the Biden administration restricting the export of advanced computer chips while trying to boost the US industry.
“This is not competition with China – we want to deepen our engagement with Africa,” Yellen said. “We want to make sure we don’t create the same problems that Chinese investment has sometimes caused here. That we have transparency, that we have projects that really bring broad benefits to the African people and don’t leave a legacy of unsustainable debt.”
Yellen said she was struck by “a sense of dynamism and optimism in all the government officials and private sector people I met” during her time in Senegal. She pointed to women entrepreneurs who received start-up money through the Senegalese government.
“There’s a kind of vibrancy in the country and a mindset that we’ve seen,” Yellen said. “They come up with very innovative and original ideas about what they can do to both meet local needs and easily find a global market.”
The Bharat Express News writer Josh Boak in Baltimore contributed to this report.