Janet Yellen says she supports the elimination of the debt limit.
Treasury Secretary Janet L. Yellen said Thursday that the legal debt limit should be lifted, arguing that the borrowing limit is “destructive” and poses unnecessary risks to the economy.
She made the comments during a House Financial Services Committee hearing as the United States faces an Oct. 18 deadline to raise or suspend the debt limit. Ms Yellen warned Thursday that inaction would be “catastrophic” for the economy and said she supported law Project remove the limit because it prevents the government from making expenditures authorized by Congress.
“I think when Congress makes spending laws and puts in place a tax policy that determines taxes, those are the critical decisions Congress makes,” Ms. Yellen said. “And if in order to finance these tax expenditures and decisions it is necessary to issue additional debt, I think it is very destructive to put the president and myself, as secretary of the treasury, in a situation where we may be unable to pay the resulting bills. these past decisions.
The debt limit was instituted at the start of the 20th century, so the Treasury did not need to ask for permission every time it needed to issue bonds to pay bills. The first debt limit was part of the Second Liberty Bond Act of 1917, according to the Congressional Research Service. A general limit on the federal debt was imposed in 1939.
Republicans refuse to join Democrats in raising the debt ceiling, insisting they are acting alone to protest the big spending plans Democrats hope to pass. During Thursday’s hearing, Ms. Yellen said debt limiting should be a bipartisan responsibility because it allows the government to pay off debts incurred by Democrats and Republicans.
If the debt limit is not met by the Oct. 18 deadline, Social Security payments will be delayed, troops may not receive their paychecks on time, and mortgage and mortgage interest rates. auto loans could increase.
Ms. Yellen also warned that an erosion of confidence in the security of the US Treasury’s debt would be a “catastrophic event”.