During a Senate testimony on her department’s budget, Treasury Secretary Janet Yellen warned that the United States government will default on its debt unless Congress raises the debt ceiling.
On Wednesday afternoon, Yellen warned that “absolutely catastrophic economic consequences” would emerge if lawmakers do not modify the legal cap on how much debt the federal government can owe.
“I believe it would precipitate a financial crisis, it would threaten the jobs and savings of Americans, and at a time when we’re still recovering from the COVID pandemic,” said Yellen, as quoted by The Hill. “I would plead with Congress simply to protect the full faith and credit of the United States by acting to raise or suspend the debt limit as soon as possible.”
“We can’t tolerate any chance of defaulting on the government debt, and there is a lot of uncertainty. It’s possible that we could reach that point,” she continued.
Congressional Republicans are taking the opportunity to restrict President Biden’s spending and enact fiscal reform.
As Rep. Jim Banks (R-IN) wrote to his colleagues on the House Republican Study Committee: “Given the worsening fiscal outlook for the federal government and at least three-and-a-half more years of President Biden proposing trillions and trillions of dollars of deficit-financed spending, it is more important than ever for conservatives to reclaim the debt limit as a tool to highlight and force action on our nation’s spending problem.”
In the Senate, Republican lawmakers do not currently expect that their colleagues will provide the necessary ten votes to join with Democrats in raising the debt limit.
Yellen — who served as Federal Reserve Chair from 2014 to 2018 — recently confirmed that she will continue to push for President Biden’s spending agenda. Over the past six months, the White House introduced the American Jobs Plan, the American Families Plan, and the already-passed American Rescue Plan. The President’s budget for fiscal year 2022 — which would include the former two packages — amounts to $6 trillion in spending.
Beyond the issue of federal debt, Yellen — emphasizing the Treasury Department’s management of COVID-19 stimulus — asked Congress for more funding:
Not accounting for inflation, our annual budget is still at the same enacted level as 2010, and critical policy offices — like Domestic Finance, Economic Policy, and Tax Policy — have seen their budgets cut by as much as 20 percent since 2016.
Our team has done valiant work implementing these programs with the resources at our disposal. But we cannot continue to be good stewards of this recovery — and tackle the new bodies of work that Congress assigns to us in the years beyond — with a budget that was designed for 2010.
Yellen also denounced ProPublica’s illegal release of twenty-five American billionaires’ tax returns:
It is important to stress that unauthorized disclosure of taxpayer information is a crime, and that it has been referred to the FBI, federal prosecutors, and Treasury Department oversight authorities. We don’t yet know what occurred — but all is being done to get to the bottom of this criminal activity. And we will be sure to update you as we learn more.
The ProPublica report — beyond ignoring its own major donors — failed to mention that the highest-earning Americans provide the majority of federal revenue. Meanwhile, one-third of Americans pay no federal income taxes.
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