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US treasury secretary: country could default on debt for the first time in its history

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US Treasury Secretary Janet Yellen warned that the government may have to take “extraordinary measures” to avoid the country’s first debt default.

The warning, which heightened tensions between Republicans and Democrats over the contentious issue, came in a letter sent by the minister to new Republican House Speaker Kevin McCarthy, in which she said her ministry was “preparing starting this month.” to take the first measures in relation to several pension funds for state employees.

While these measures should be temporary, Yellen warned that in the absence of a new cap, the United States could be in default for the first time in its history.

This means that Washington will not be able to pay debt payments or interest on time.

“Government failure to comply will irreparably damage the US economy, the livelihoods of all Americans, and global financial stability,” the letter said.

The Republican majority in the House of Representatives could use the time factor to try to get Democrats to forgo some of the spending they approved when they had a majority of seats in the House.

In this regard, the Speaker of the House of Representatives, Kevin McCarthy, told reporters yesterday, Thursday, that “spending is out of control, there is no oversight, and this cannot continue.” “We need to change the way we spend money recklessly in this country, and we will make sure that happens,” he added.

On the Democratic side, House Budget Committee member Brendan Boyle found Janet Yellen’s statement “very disturbing” and accused Republicans of “seeing it natural to take our economy hostage for sweeping and unpopular reforms.”

As for the White House, he called on Congress to raise the national debt ceiling of the country, indicating that he did not intend to negotiate with the Republican majority on this issue.

US presidential spokeswoman Karen Jean-Pierre reminded reporters that Republican and Democratic lawmakers usually cooperate on this issue, “and that’s what’s required,” adding that the issue of debt should not be politicized.

“House Republicans are literally telling Americans they are ready for the most egregious collapse in modern history if they can’t cut spending on their most popular programs,” said her aide Andrew Bates.

Among the expenses that Democrats say Republicans want to eliminate are health insurance, especially for retirees, and food aid for the poor.

This isn’t the first time the file has been controversial: while lawmakers have raised or suspended maximum debt 78 times since 1960, often without difficulty, the 79th time in December 2021 sparked dangerous tensions between the two sides.

The Republican minority at the time believed that raising the ceiling would be tantamount to giving carte blanche to the President of the United States and accused it of fueling inflation. And the Democrats felt that the increase in the limit was intended to return borrowed money, including billions spent during the era of former President Donald Trump.

Congress then agreed to raise the limit to $31.381 billion at midnight on the day the previous limit was reached.

Source: AFP

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