The United States may face a "devastating" default and "spiraling recession" if the US Congress does not raise the debt ceiling this summer, Treasury Secretary Janet Yellen told the Axios news portal on Saturday
MOSCOW (Pakistan Point News / Sputnik - 28th January, 2023) The United States may face a "devastating" default and "spiraling recession" if the US Congress does not raise the debt ceiling this summer, Treasury Secretary Janet Yellen told the Axios news portal on Saturday.
"Of course, it makes me nervous. It (the default) would be devastating. It's a catastrophe," Yellen was quoted as saying by the news portal.
The treasury secretary also said that the US would be dragged into a financial crisis in the event of the default, forecasting that the crisis would be followed by recession, as cited by Axios.
"Spending would have to decline to match the tax revenues," Yellen added, as quoted in the report.
On Wednesday, US House Speaker Kevin McCarthy called President Joe Biden's refusal to discuss the state debt ceiling "irresponsible" and warned that a delay in negotiations would increase financial risks for the United States. The House Speaker also called the US' state debt surpassing $31 trillion or 120% of the gross domestic product (GDP) "the greatest threat to America" and said that he was not completely against the decision to increase the state spending, but was advocating for a "responsible" debt ceiling.
Earlier this month, Yellen warned that the US would soon reach its outstanding debt limit, with the US national debt now amounting to $31.46 trillion. Last week, the Treasury said it had begun taking extraordinary measures to avoid a government debt default by temporarily suspending payments not immediately needed for essential programs.