The U.S. economy would suffer a 'substantial' hit if Treasury was no longer able to issue debt, impacting financial markets and consumer confidence, Yellen said, calling the prospect 'unthinkable.' Yellen warns a default would threaten global economy:
NIIGATA, Japan -U.S. Treasury Secretary Janet Yellen on Thursday urged Congress to raise the $31.4 trillion federal debt limit and avert an unprecedented default that would trigger a global economic downturn and risk undermining U.S. global economic leadership.
U.S. President Joe Biden on Wednesday said failure by Congress to act before Treasury runs out of money to pay the government's bills — something that could happen as early as June 1 — risked throwing the U.S. economy into a recession. The U.S. economy would suffer a "substantial" hit if Treasury was no longer able to issue debt, not to mention the impact on financial markets and institutions and consumer confidence, she said, calling the prospect "unthinkable."
Unlike most developed countries, the U.S. sets a ceiling on how much it can borrow. Because the government spends more than it takes in, lawmakers must periodically raise that cap. The United States had taken action to strengthen confidence in its banking system after the failure of three regional banks, Yellen said, as well as enacting legislation to invest in infrastructure, alternative energy and semiconductor chips.
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