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As Congress faces a June deadline to raise the debt ceiling, Treasury Secretary Janet Yellen warned that high levels of debt are not sustainable, but she was not referring to the US debt.
Speaking Thursday at a keynote Q&A session hosted by the Center for Strategic and International Studies, Yellen acknowledged that “when a country’s debt load reaches a certain level it really makes it unsustainable.” But his comments were made in the context of a discussion about African countries restructuring their debt. Yellen noted that she recently met with officials from Zambia, which became the first African sovereign default in 2020 and with a debt-to-GDP ratio as high as 133% at the end of 2021, according to the International Monetary Fund (IMF).
“Debt is a big issue, debt is very high, a huge issue for many African countries and especially Zambia, where we went,” he said.
But he didn’t mention that massive federal spending is pushing America toward similarly unsustainable levels of debt.
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Treasury Secretary Janet Yellen remarks during a meeting with Zambian President Hakande Hichilema during the US-Africa Leaders Summit on December 15, 2022 in Washington DC.
The most recent long-term outlook from the Congressional Budget Office projected the US national debt to equal 98% of GDP at the end of 2022. Will reach 185% of GDP in 2052.
Government borrowing has already reached its statutory $31.38 trillion debt limit to meet Congressional spending obligations. The Treasury Department has resorted to “extraordinary measures” to avoid a sovereign default and Yellen gave Congress an “early June” deadline to negotiate with President Biden on raising the debt ceiling.
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Federal debt created by the public since the housing crisis has mostly been the result of borrowing from US domestic entities, not foreign nations. (Committee for a Responsible Federal Budget / Fox News)
“I think everybody realizes that when a country’s debt load reaches a certain level it really makes it unsustainable,” Yellen said as she met with African countries and IMF and World Bank officials. discussed with. “It is not just a question of creditors giving concessions to help borrowers.
“Debt restructuring not only serves the interests of the borrowers, it also serves the interests of the creditors, because if the country is prevented from growing, developing, investing to keep it on a strong economic course at the end of the day, More restructuring will be necessary and the country will be less able to pay creditors. Hence, there is a general interest in getting it done,” he said.
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Rep. Thomas Massie, R-Ky., talks about his national debt button before President Joe Biden’s State of the Union address in the House chamber, Tuesday, Feb. 7, 2023. (Tom Williams / CQ-Roll Call, Inc. Images via Getty / Getty Images)
If the US fails to raise the debt ceiling, the government may be forced to temporarily default on some of its spending obligations, which Yellen previously warned would have severe negative economic consequences. Interest rates are likely to rise, and demand for Treasuries will fall; The risk of default can also increase the cost of borrowing, according to the Committee for a Responsible Federal Budget.
While the US has never defaulted on its debt before, it came close in 2011, when House Republicans refused to pass a debt-ceiling increase, prompting ratings agency Standard & Poor’s to downgrade the US debt rating by one notch.
Bipartisan spending over the past two decades has increased the national debt from nearly $10 trillion when President George W. Bush took office, to nearly $24 trillion when President Barack Obama began his term, to nearly $24 trillion when President Donald Trump began his term. 14 trillion dollars. More than $30 trillion at the start of President Joe Biden’s administration.
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The national debt currently stands at over $31.5 trillion.
Fox Business’ Megan Haney and Eric Revell contributed to this report.
Source: www.foxbusiness.com
