Janet Yellen, US Secretary of the Treasury, during a press conference at the Group of Seven (G-7) Finance Ministers and Central Bank Governors meeting in Niigata, Japan, on Thursday, May 11, 2023.
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Treasury Secretary Janet Yellen said the idea of US lawmakers allowing the country to default on its debt was “unthinkable”.
Speaking to reporters ahead of the meeting of G7 finance ministers and central bank governors in Niigata, Japan, Yellen said she was aware of former President Donald Trump’s proposal to Republican lawmakers to default the country.
“The idea of not being able to service our debt would be so damaging to the US and global economy that I think everyone should think it’s unthinkable,” she told reporters. “America should never default.”
When asked what steps the Biden administration might take after a default, Yellen stressed that lawmakers need to raise the debt ceiling.
“There is no good alternative that will save us from catastrophe. I don’t want to rank which bad alternative is better than others, but the only sensible thing to do is to raise the debt ceiling and avoid the dire consequences that are to come,” she told reporters, noting that a non-payment can be avoided.
“There is no good reason to create a good crisis yourself. The US Congress has raised or suspended the debt ceiling nearly 80 times since 1960. I urge him to act quickly and do this again,” she said.
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Yellen’s comments came after she warned of an “economic catastrophe” if the US fails to raise its debt ceiling in the coming weeks. She has also previously warned that the US could default on its debt obligations sooner than expected – and could run out of measures as early as June 1st.
Media reports last week quoted a Treasury official as saying her trip to Japan was being cut short to ensure she could continue to participate in efforts to resolve the debt ceiling issue.
She told journalists on Thursday: “Another meeting is scheduled for next Friday and staff are working to see if they can resolve the issue. So I am very confident that the differences can be bridged and the debt ceiling will be raised.”