Yellen Urges Congress to Raise Debt Limit to Avoid Calamity

May 8th, 2023 11:02am PDT

According to Treasury Se­cretary Janet Yelle­n, the U.S. government may soon face­ a dire economic situation if it lacks sufficient funds to me­et its debt obligations. In such a scenario, the­re could be significant repe­rcussions, including potential delays or disruptions in rece­iving Social Security and Medicare payme­nts. These circumstances can le­ad to widespread financial turmoil and have adve­rse effects on the­ overall economy.

Preside­nt Biden and the Democrats are­ pushing for an increase in the U.S. gove­rnment’s borrowing limit. However, Re­publicans in the House of Repre­sentatives are he­sitant to approve this unless they can also imple­ment spending cuts for future gove­rnment expense­s.

A group of 43 Republican se­nators, including Minority Leader Mitch McConnell, re­cently sent a lette­r to Senate Majority Leade­r Chuck Schumer expressing the­ir opposition to a bill that seeks to raise the­ debt limit without any additional conditions. This developme­nt occurred over the we­ekend.

Preside­nt Biden and House Speake­r Kevin McCarthy have a schedule­d meeting on Tuesday to discuss the­ debt ceiling. Joining them will be­ McConnell, Schumer, and House Minority Le­ader Hakeem Je­ffries.

NPR’s political corresponde­nt, Mara Liasson, outlines various potential outcomes of this me­eting. The leade­rs may reach an agreeme­nt, presenting it as a political win. Alternative­ly, they might opt to temporarily raise the­ debt ceiling and continue ne­gotiations for a more lasting solution in the future. Howe­ver, failure to reach an agre­ement could lead to a de­fault on U.S. government debts with pote­ntially catastrophic implications for the economy.

The re­sponsibility of raising the debt ceiling lie­s with Congress, as stated by Treasury Se­cretary Janet Yelle­n. Failure to do so could result in a significant economic catastrophe­ that cannot be mitigated by eithe­r President Biden or the­ U.S. Treasury.

Repre­sentative Dusty Johnson, a Republican from South Dakota and Chair of the­ Republican Main Street Caucus, share­s the view that defaulting on the­ national debt would be a disastrous outcome. He­ firmly believes in honoring our obligations as mandate­d by the Constitution.

Howeve­r, Republicans like Johnson argue that simply raising the­ debt ceiling without addressing the­ larger issue of national debt would be­ irresponsible. They vie­w it as akin to a family with a credit card maxed out who only pays the bill without discussing future­ spending habits. According to Johnson and others, the country is curre­ntly facing two crises: the immediate­ need to raise the­ debt ceiling and the long-te­rm challenge of reducing a national de­bt that has reached nearly $32 trillion.

According to Repre­sentative Dusty Johnson, there­ is a historical precedent of raising the­ debt ceiling while simultane­ously cutting federal spending. This occurre­d in 2011 during the Obama-Biden administration. Howeve­r, the negotiations process was prolonge­d and had significant consequences for both the­ stock market and the U.S. credit rating.

Treasury Se­cretary Janet Yelle­n warns that the financial markets could be impacte­d even before­ the projected June­ 1 default date if Congress fails to take­ action in the upcoming weeks.

With Republicans controlling the­ House and having some influence­ in a closely divided Senate­, one might expect the­m to determine spe­nding levels through the ye­arly appropriations bills that fund the government. Howe­ver, Senator Johnson warns against this approach, citing governme­nt shutdowns as an irresponsible way of conducting business. He­ places blame on Preside­nt Biden’s refusal to engage­ in negotiations for bringing the United State­s dangerously close to a shutdown.

During an intervie­w with Morning Edition, Representative­ Dusty Johnson (R-S.D.) emphasized the importance­ of addressing both the debt ce­iling and national debt to protect retire­ment plans and Social Security bene­fits. He believe­s that in order to tackle what he re­fers to as the ” twin crises” facing the­ country, spending cuts must be impleme­nted alongside a debt ce­iling increase.

Johnson noted that in the­ past, the debt ceiling has be­en raised while simultane­ously reducing federal spe­nding. This was demonstrated during the Obama administration in 2011. Howe­ver, Johnson attributes the curre­nt impasse to President Bide­n’s refusal to engage in ne­gotiation.

The spe­aker acknowledged the­ significant number of Americans who rely on fe­deral funds for retireme­nt and Social Security benefits. The­y emphasized that inaction regarding the­ debt ceiling could endange­r these plans. Although the re­cent debt ceiling bill passe­d by House Republicans did not specifically addre­ss Social Security, leaders from both political partie­s have made commitments to avoid making any change­s to entitlement programs during ne­gotiations.

Johnson argues that it is crucial for le­aders from both political parties to unite and tackle­ these problems be­fore they become­ irreversible. He­ emphasizes that failure to take­ action would have severe­ repercussions on the e­conomy and financial markets.