Washington: ‘It is unthinkable that the country risks defaulting on the government debt. If the US Congress fails to raise the debt limit, it could lead to serious and catastrophic economic consequences,” warned Treasury Secretary Janet Yellen. Yellen also said the US government’s failure to pay its debts would be an unprecedented event in US history. 

The national debt on the U.S. reached $28 trillion in March. When other public and private debt is combined, the US debt is estimated at a staggering $85 trillion. That’s more than four times the current GDP of the United States. If the government debt alone was to be considered, every citizen of the United States is estimated to carry a debt of $85,000. 

“Two years ago, the then US President Donald Trump decided to suspend the debt limit (ceiling). The suspension is in place until July 31, and unless a new decision is made, the Biden administration will not be able to obtain funding for further expenses and debt repayments. This will be a severe crisis for the US economy,” said Treasury Secretary Yellen. Yellen stated that she trusted the US Congress and called on it to raise the debt ceiling or suspend it as soon as possible. 

The U.S. economy has not yet recovered from the corona crisis. The administration has provided an additional $6 trillion in funding through various relief programs to boost the economy. The results are expected by the end of this year, and the economy is expected to pick up. However, if the debt ceiling is not decided, the economy could be in turmoil. 

Treasury Secretary Yellen stated that “The US Treasury Department has taken some additional measures to pay off debts in the wake of the coronavirus pandemic. But these will also expire in August. If funding is not made available after that, entrepreneurs, including governments of other countries that have purchased bonds, are likely to face financial difficulties. That could start a series of crises. It would precipitate a financial crisis, threatening the jobs and savings of Americans at a time when we’re still recovering from the COVID pandemic.” 

In 2011, during President Obama’s tenure, there was a fierce political tussle between the ruling and opposition parties over the ‘debt ceiling’ issue. The US administration was even forced to shut down for a few days. 

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