According to Treasury Secretary Janet Yellen, it should be “unthinkable” for the United States to default on its debt. Before the G-7 finance ministers and governors of the central banks met in Niigata, Japan, Yellen said she was aware of Republican legislators’ recommendation to allow the US fail, which was made by former president Donald Trump.
She told reporters, “I think everyone should regard it as unthinkable. The notion of defaulting on our debt is something that would so severely undermine the U.S. and global economy.” “America should never go into default.”
Yellen highlighted that in order to prevent the disastrous effects of a debt default, policymakers must increase the debt limit. There is no viable option that can prevent a default, according to the Biden administration, which has been pleading with legislators to take immediate action.
“Generating a problem of our own creation is not a valid justification. Since 1960, the U.S. Congress has increased or suspended the debt ceiling about 80 times. I implore it to move swiftly in order to do so once again,” she added.
Yellen made her remarks after threatening a “economic catastrophe” if the United States doesn’t lift its debt limit in the next weeks. She has also previously expressed concern that the United States may be unable to pay its debts on time and may run out of options as early as June 1.
The recent trip to Japan by the Treasury official will apparently be cut short so that she may continue to take part in discussions on the debt limit problem. Another meeting is set for the following Friday, according to Yellen, and her team is seeking to find common ground so the debt limit may be lifted.
The debt ceiling sets a limit on the total amount of debt that the United States government is permitted to issue. The United States might make history by defaulting on its debt if the debt limit is not lifted. A U.S. default would have wide-ranging effects on the world economy that might be disastrous.
Yellen’s remarks come at a time when political disagreements exist on raising the debt limit, with some Republicans being opposed to the idea. To prevent serious economic repercussions, the majority of experts feel that the United States must increase its debt limit. Trillions of dollars have already been spent by the U.S. government on pandemic relief and stimulus programs, and a higher debt limit is required to allow for more expenditure.