Yellen warns Congress debt limit must be increased by October 18
The two top U.S. economic policymakers will warn lawmakers on Tuesday that the Delta variant of the coronavirus has slowed the economic recovery but will convey optimism about the overall trajectory of the economy, according to prepared remarks.
Treasury Secretary Janet L. Yellen and Federal Reserve Chairman Jerome H. Powell to testify before the Senate Banking Committee as the US economy stands at a crossroads, with businesses facing labor shortages -work and consumers faced with rising prices in a context of resurgence of the pandemic. Congress is also grappling with a host of legislative challenges in the coming days, all of which could impact the economy.
They include extending federal funding to avoid a U.S. government shutdown, increasing the debt limit to avoid defaulting on the nation’s financial obligations, and adopting the country’s infrastructure and social safety net. President Biden.
“As our economy continues to grow and recover a substantial portion of the jobs lost in 2020, the significant challenges of the Delta variant continue to dampen the speed of the recovery and present substantial obstacles to a vibrant economy,” Ms. Yellen will say, according to her prepared remarks. “Still, I remain optimistic about the medium-term trajectory of our economy, and I think we will return to full employment next year.”
The testimony will offer Ms Yellen and Mr Powell a chance to publicly pressure lawmakers to take action to raise or suspend the country’s borrowing cap and to warn of the dire consequences if states -Unis did not respect their obligations. Ms Yellen warned that debt limits are eroding confidence in the United States and that a default, which could occur as early as mid-October, would cause irreparable damage to the economy.
In a letter to Congress ahead of the hearing, Yellen said the Treasury would likely exhaust the “extraordinary measures” she used to delay a default if Congress did not act to increase or suspend the debt limit. by October 18.
“At this point, we expect the treasury to end up with very limited resources that would run out quickly,” she wrote. “It is not certain that we can continue to meet all of the nation’s commitments after this date.”
For weeks, Ms. Yellen quietly pressured lawmakers to put politics aside and ensure the United States can continue to meet its tax obligations. She has been in contact with Wall Street CEOs and former Treasury Secretaries as she seeks to keep markets calm and find allies who can help her advocate for recalcitrant Republicans, who believe that Democrats must manage the debt limit on their own.
“It is imperative that Congress address the debt limit quickly,” said Yellen. “The faith and credit of the United States would be compromised, and our country would likely face a financial crisis and economic recession.”
Mr. Powell is expected to tell senators that the Fed will continue to support the economy with its monetary policies, which affect the cost of borrowing and spending. But it will also make it clear that Fed officials will act if a recent price hike persists.
“Inflation is high and will likely remain so in the months to come before it moderates,” Mr Powell is ready to say, based on published remarks Monday afternoon.
He will cite the persistent coronavirus pandemic as a risk to the economic outlook, according to his prepared statement.
Mr Powell has also been concerned about the debt limit in recent weeks, telling a press conference last week that defaulting is “just not something we should be considering” and that “no one should assume that the Fed or anyone else can protect the markets or the economy in the event of default, fully protect themselves in the event of default to ensure that we pay these debts when they are. due.
Ms. Yellen and Mr. Powell will testify again Thursday before the House Financial Services Committee.