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“If the debt ceiling is not raised, Yellen warns of tough decisions ahead”

Yellen says 'hard choices' will need to be made if debt ceiling is not raised

Yellen says ‘hard choices’ will need to be made if debt ceiling is not raised

US Treasury Secretary, Janet Yellen, has warned of the dire consequences that could arise if the debt ceiling is not raised. She has stated that the United States could default on its debt as early as June 1, which could lead to significant “economic chaos”. Yellen reaffirmed this message during an interview with NBC’s “Meet the Press” and emphasized that there will be no good outcomes if Congress fails to take action. The debt ceiling must be raised to prevent the US government from defaulting on its financial responsibilities, which could cause widespread economic disruption.

Raising the debt ceiling does not authorize new spending. Instead, it is necessary for the government to cover spending commitments already approved by Congress and the President. The on-again, off-again deliberations on Capitol Hill have put the situation in a tense state, with House Republicans stating that they will not lift the limit if Biden and lawmakers do not agree to future spending cuts.

US President, Joe Biden, has urged Republicans to accept that a bipartisan deal cannot be made solely on their partisan terms. However, negotiations stalled on Saturday, leading to Biden stating that Republicans needed to move from their extreme position. He plans to call House Speaker, Kevin McCarthy, in a bid to bring Republicans back to the negotiating table. Despite this, McCarthy has stated that he does not think that negotiations will move forward until Biden returns to the US.

During her May 15 statement at the Independent Community Bankers of America Capital Summit, Yellen said that the consequences of default could lead to an economic downturn as severe as the Great Recession. The stock market’s value could fall by approximately 45%, leaving eight million Americans out of work. A Moody’s Analytics report stated that more than seven million Americans could lose their jobs, and $10 trillion in household wealth could disappear. Yellen’s warning highlights the potential impact on essential government services if the debt ceiling were to breach.

FAQs
Q: What is the “debt ceiling”?
A: The debt ceiling is a cap set by Congress on the amount of money that the US government can borrow to fund its operations. It limits how much the US Treasury can borrow to finance the government’s obligations.

Q: What happens if the debt ceiling is not raised?
A: If the debt ceiling is not raised, the US government will not be able to borrow any more money, potentially leading to a default on its debts. This could have wide-ranging consequences, including economic disruption and a loss of faith in the US government’s ability to manage its finances.

Q: Has the debt ceiling been raised before?
A: Yes, the debt ceiling has been raised numerous times in the past, and it has become a contentious political issue in recent years.

Q: Who has the power to raise the debt ceiling?
A: Only Congress has the power to raise the debt ceiling, which requires the approval of both the House and the Senate. However, the President can veto the increase, leading to Congress needing a two-thirds majority vote in both chambers to override the veto.

Yellen says 'hard choices' will need to be made if debt ceiling is not raised
Yellen says ‘hard choices’ will need to be made if debt ceiling is not raised

“If Debt Ceiling is Not Raised, Yellen Warns of Tough Decisions Ahead”

US Treasury Secretary Janet Yellen has warned that tough decisions will have to be made regarding which bills will go unpaid if the debt ceiling is not raised. Yellen has previously warned that the US could default on its debt as early as June 1, which could cause widespread economic chaos. Yellen has said there will be no good outcomes if Congress fails to take action. Raising the debt ceiling is necessary for the government to cover spending commitments already approved by Congress and the president, to prevent default. President Joe Biden has called on Republicans to accept that there is no bipartisan deal to be made solely on their partisan terms. McCarthy, R-Calif., told reporters on Saturday that negotiations wouldn’t move forward until Biden returned to the US. Yellen has warned that a default could lead to a severe economic downturn, affecting government services. Biden hopes an agreement can be reached with Republicans, but he cannot guarantee that they won’t force a default.

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