Treasury Secretary Janet Yellen said on Saturday that House Republicans seeking to negotiate spending cuts in the midst of a potential debt ceiling fight are “extremely reckless.”
In a recent letter, the official told House Speaker Kevin McCarthy (R-CA) and other members that the debt ceiling, an arbitrary maximum on the national debt set by Congress, had exceeded the statutory limit of approximately $31.4 trillion as of this week. Yellen told the Associated Press that House Republicans who want to slash spending risk creating a “self-imposed tragedy in the United States and the global economy.”
“This is about paying debts that have already been incurred by decisions made by this and previous Congresses, not about additional spending,” she explained, adding that long-term spending cannot be “negotiated over whether or not we’re going to pay our bills.”
Yellen, who is currently touring multiple African countries as part of a trip focused on the continent’s economic development, described the position of delaying a debt ceiling hike until more spending cuts are implemented as “very irresponsible,” adding that the position may have serious consequences even before “the day of reckoning.” According to her letter to members of congress, new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund have been tentatively suspended; the Treasury Department’s “drastic measures” to keep the government solvent are projected to last until June.
Yellen predicts that Congress would defuse the situation because they recognize the economic disaster that would result from the federal government defaulting on its commitments. Aside from the prospect of a default, a lack of confidence in the government’s capacity to repay debt might prompt “markets to get pretty anxious,” she added.
Over the last few decades, the federal government has depended on large budget deficits to fund deficit-driven spending. According to Treasury Department data, Social Security, Medicare, and other health initiatives accounted for 46% of the federal budget during the previous fiscal year, even as maintenance expenditures on the national debt skyrocketed owing to the current surge in interest rates across the economy.
Yellen, who formerly served as the head of the Federal Reserve, stated last week in another warning that “failure to satisfy the government’s responsibilities” would result in “irreparable harm” to both the domestic economy and the international financial system. “Presidents and Treasury Secretaries from both parties have said unequivocally that the government must not default on any United States commitment,” she wrote. “However, the implementation of exceptional measures allows the government to satisfy its duties for a short period.”
As McCarthy prepares to meet with President Joe Biden to discuss debt ceiling discussions, House Republicans have asked their Democratic counterparts to look into possible spending cutbacks. In a statement, Ways and Means Committee Chairman Jason Smith (R-MO) stated that “reckless spending” had resulted in “the biggest jump in prices in forty years” and resultant reductions in living standards.
“Instead of criticizing his political opponents, President Biden should be using this time working with House Republicans to handle the debt issue in a way that enforces some budgetary sense. Otherwise, the President is only planning America’s next financial disaster,” he added. “We can find practical ways to stop wasteful spending, stabilize the American economy, and guarantee we pay our debt obligations.”