United States Treasury Secretary, Janet Yellen, is urging lawmakers to raise the U.S. government's borrowing limit. If the debt limit isn't raised by October 18th, Yellen warns that credit in the U.S. would be impaired and the country would likely face a financial crisis and economic recession. Failure to raise the debt ceiling would likely raise interest rates. The debt limit restricts the amount of money the government can borrow. It is raised to deal with government spending and taxing decisions which we have seen these actions being used during this COVID-19 pandemic. Yellen is warning congressional leaders to not make a decision on this issue in the last minute, as it could cause serious harm to businesses and consumer confidence, negatively impacting the credit rating for the U.S. for years to come. Government officials hope that Republicans and Democrats can come together to fix the debt ceiling, but Republicans argued that Democrats could use their majority to pass the bill.
Extending the debt is just another log that is stoking the fire between lawmakers and the Federal Reserve. Chairman Jerome Powell came under fire from some Republicans complaining about the high and growing prices for goods and services. Even some Democrats are in conflict with the Fed. Senator Elizabeth Warren stated that she will oppose a second term for Powell. She claims that Powell has made the U.S. banking system less safe which makes him a dangerous man to lead the Federal Reserve. It will be interesting to see how the relationship between congressional leaders and the Fed tie into the solutions in how to fix the U.S. economy.
Source: Yellen warns delay in raising debt limit will slow economy - ABC News (go.com)
1 comment:
Inevitably the federal government will be forced to raise the debt limit as failure to do so will be far worse. The credibility of US bonds and the track record it has built for itself can not be understated as entire markets depend on it. Unfortunately that is also a major weakness that plagues our modern economic system.
It is arguable that we are overleveraged and there must be steps outlined by the US government and Federal Reserve to make us less reliant on debt. I definitely advocate for more fiscal responsibility to spend money we have but it should not hinder our ability to govern.
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