DAKAR, Senegal (AP) – Treasury Secretary Janet Yellen said in an Associated Press interview on Saturday that she expects Congress will eventually vote to raise America’s debt limit, but that House Republicans’ demands for spending cuts in return for supporting the increase are “irresponsible.” . to do” and risk creating “own disaster” for the global economy.
The Biden administration and Republican lawmakers have been fighting over how to increase the government’s legal borrowing capacity. On Thursday, the government went against the $31.381 trillion debt ceiling, forcing the US Treasury Department to take “extraordinary” accounting measures to keep the government running.
Asked in an interview, conducted during a trip to Africa, about talk of withholding agreement on a higher debt limit, unless there are spending cuts, Yellen called the stance “irresponsible” and said it could have serious consequences. before the “day of reckoning”.
“It is possible that the market is worried about whether the US will pay its bills,” he said, referring to the negative economic impact of the debt event in 2011.
As a potential default, he said, “it would cause a self-inflicted disaster in the United States and the world economy.” The Treasury’s extraordinary measures so far mean the US government will have to be able to operate until some point in June, when restrictions will need to be extended to avoid significant economic damage.
Yellen said she has not yet spoken to U.S. Rep. Kevin McCarthy, the newly elected Republican speaker of the House. McCarthy has yet to specify the size and target of the spending cuts he wants to put the federal government on a healthier financial path.
President Joe Biden and administration officials have called for a “clean increase” – unrelated to cuts – to lending capacity, saying the default risk could lead to a deep recession that would threaten the world if faith is lost. credit from the US government.
“Congress needs to understand that this is about paying bills that have been passed by decisions with this Congress and in the past and not about new spending,” Yellen said. He said he believes the government’s debt levels are sustainable, “but it’s not negotiable whether we’re going to pay the bills.”
Despite the dire dangers, Yellen said she believes the situation will be overcome because lawmakers can recognize the growing danger if the federal government can’t pay all the bills: crashing financial markets, mass shootings, and an economic downturn that could endanger America. Place in the world hierarchy.
“I’m sure in the end we’ll find a way around this,” Yellen said.
The treasury secretary said the White House and officials from his department “are meeting to discuss a possible path forward. And we will have discussions with members of Congress to try to understand what they see as a path forward.
The White House said Friday that Biden “looks forward” to sitting down with McCarthy to discuss a variety of topics. But the statement contained no invitation or date for the meeting.
Yellen said the administration’s position remains non-negotiable on the debt limit, but she did not outline a strategy the White House might negotiate to ensure the ceiling is raised.
“Congress has to do it,” he said. “It has to be done. It cannot be something that depends on cutting.
Yellen sat for the interview Saturday in the middle of a trip to the continent, where she met with her Chinese counterpart in Switzerland before going to Senegal, Zambia and South Africa.
The Biden administration is trying to signal its support for improving the economies of African countries, many of which have young populations that will ultimately make these countries drivers of growth in the coming decades. At a summit of African nations held in Washington last month, Biden said he would visit the continent this year as a sign of his desire to increase engagement with the United States.
Before the interview, Yellen traveled to Goree Island in Senegal, exploring a building known as the House of Slaves that was the center of the Atlantic slave trade that defined much of America’s history.
The economist and former chairman of the Federal Reserve has emphasized the desire to reduce racial and income inequality, an element of systemic racism linked to slavery and the consequences of segregation. For Democrats, the issue of how to bridge the divide is not just a matter of social justice but of political pragmatism, since black voters are a key constituency for winning elections.
Yellen said the administration has made no changes to reparations — payments and other programs intended for descendants of slaves — to address the disparity.
“The administration has not made reparations part of the answer,” Yellen said, adding that “we have a program to try to address these issues that includes many positive steps and adjustments and increases opportunities.”
America is trying to appeal to African countries in moral terms, saying that aid and loans from the US will be transparent and fair in a way that Chinese investment has not been.
The relationship between the US and China – the world’s two largest economies – has become increasingly antagonistic amid the geopolitical fallout from China’s friendship with Russia, the ongoing coronavirus and an era of open globalization that has prioritized national security.
The past two US presidential administrations have challenged China’s trade practices, with the Biden administration restricting exports of advanced computer chips as it tried to boost the US sector.
“This is not a competition with China – we want to expand our engagement with Africa,” Yellen said. “We want to make sure that we do not create the same problems with Chinese investments that are sometimes made here. If we have transparency, if we have projects that really bring benefits to the people of Africa and do not leave unsustainable debts.
Yellen said she was struck during her time in Senegal by “the sense of dynamism and optimism among all the government and private sector officials I have met.” He pointed to female entrepreneurs who received seed money through the Senegalese government.
“There’s a kind of passion about the country and a passion for what it can do,” Yellen said. “They come up with innovative and original ideas about what they can do to meet local needs and find global markets with ease.”
Associated Press writer Josh Boak in Baltimore contributed to this report.