Yellen warns US House members of ‘economic collapse’ from default

WASHINGTON, March 10 (Reuters) – U.S. Treasury Secretary Janet Yellen urged members of the U.S. House of Representatives on Friday to raise the federal debt ceiling unconditionally, warning that a U.S. debt default would cause “economic and financial collapse.”

Yellen, in budget testimony before the Republican-controlled House Ways and Means Committee, said failure to increase the $31.4 trillion borrowing cap would threaten the economic growth the US has made since the COVID-19 pandemic. .

“In my assessment — and that of economists across the board — a default on our debt would cause an economic and financial catastrophe,” Yellen said. “I urge all members of Congress to come together to address the debt limit — without conditions and without waiting until the last minute.”

Asked about the possibility of prioritizing payments to cover US debt repayment first from available cash resources, as suggested by some Republicans, Yellen said that “is not a solution to the issue of debt ceiling.”

“Prioritizing is not just paying all the government bills when they come. That’s something we haven’t done since 1789.

The only option to avoid a crushing rise in interest rates after a default is for the US to commit to paying bills on time, he said.

“If we don’t do that and think that there are some shortcuts around this that will avoid economic chaos, we are kidding ourselves because not paying government bills will create an economic and financial collapse,” he said. .

Some Republicans have demanded spending concessions from US President Joe Biden in exchange for raising the debt ceiling. Yellen has refused to negotiate on raising the debt ceiling, arguing that it is about making good on past spending decisions by Congress.

Reporting by David Lawder; Editing by Paul Simao and Josie Kao

Our Standards: The Thomson Reuters Trust Principles.