Yellen says veterans, seniors at risk in debt-limit showdown

US Treasury Secretary Janet Yellen renewed her warning that Congress must raise the federal government’s debt ceiling to avoid an “economic and financial catastrophe.”

“The solution is simple: Congress must vote to raise or suspend the debt limit. It should do so without conditions, and it should not wait until the last minute,” Yellen said in remarks on Tuesday (Feb 14).

The Treasury chief told county officials gathered for a conference in Washington that many of their residents would lose jobs if Congress failed to act in time and the federal government was forced to default on its payment obligations.

“It is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security,” Yellen said. “In the longer term, a default would raise the cost of borrowing into perpetuity. Future investments – including public investments – would become substantially more costly.”

Republicans, who control the House of Representatives, have threatened to hold off on lifting the debt ceiling until Democrats agree to cut future spending. President Joe Biden has refused to negotiate over the issue.

The government hit the statutory limit for outstanding debt, US$31.4 trillion, in January. The Treasury Department said last month that accounting manoeuvres would allow it to continue meeting payments at least through early June. BLOOMBERG