by David Lawder
NUSA DUA, Indonesia (Reuters) – The US Treasury secretary warned that failure by lawmakers to raise the debt ceiling would pose a “huge threat” to the US credit rating and markets financial institutions, in view of a divided Congress.
Janet Yellen told Reuters in an interview in New Delhi on Friday that cooperation with Republicans was still possible on some issues, but raising the debt ceiling was a non-negotiable point.
Some Republicans have threatened to use the upcoming $31.4 trillion debt ceiling hike as leverage to force Democratic President Joe Biden into making concessions.
U.S. government debt stood at $31.2 trillion on Wednesday, and without an increase, analysts are predicting a potential default by the third quarter of 2023.
Republicans, who regained control of Congress in the 2010 election, brought the United States to the brink of default by demanding spending cuts the following year, leading to Standard & Poor’s first cut of US Treasury debt.
Asked whether Democrats should pass legislation in the post-election session, when they will still hold a majority through January, regardless of the outcome of the election, Janet Yellen said raising the debt ceiling was urgently needed.
“I think it’s irresponsible not to raise the debt ceiling. It’s always been raised,” the Treasury secretary said.
“It would be a huge threat to the country not to do so and completely irresponsible to threaten America’s credit rating and the functioning of the most important financial market.”
A US Treasury official said the department would be happy to see the measure passed before the newly elected Congress meets in January, adding, “It has to be done.”
BIPARTISAN WORK ALWAYS POSSIBLE
Janet Yellen has said she will defend recently passed measures against Republicans who want to gut some of Joe Biden’s spending and tax policies.
“We will definitely try to protect the gains we’ve made over the past year and a half,” he said.
If Republicans manage to take control of the House and Senate, some of them have promised to pass legislation to make Donald Trump-era tax cuts permanent and roll back parts of the bill that allocates $430 billion to green energy and Democrat-approved health subsidies
Janet Yellen, who is currently attending meetings ahead of the G20 summit in Indonesia, was speaking ahead of Democratic Senator Mark Kelly’s re-election in Arizona. Democrats are thus one seat away from retaining a majority in the Senate.
In the House, Republicans won 211 seats, seven short of a 218-seat majority.
The administration will look for measures that can win bipartisan support, said the Treasury secretary, who recalled that some Republicans supported the infrastructure bill last year and investments in semiconductors and research this year.
GLOBAL TAX AGREEMENT
Another potential moot point is the introduction of a minimum corporate tax of 15%.
“I want it done. I wish the United States had been the first to do it. It didn’t happen,” said Janet Yellen, who helped negotiate the NATO deal last year.
According to her, most EU countries will charge the minimum 15% corporate tax rate, meaning that American companies currently paying 10.5% tax abroad could end up paying the difference a these governments, possibly from 2024.
“And eventually, as they do so, pressure will also mount on the United States to comply.”
(Report by David Lawder; Version française Kate Entringer)
