The chairman of the US Fed Reserve has urged lawmakers to raise the national emergency limit on Wednesday, warning that failing to pay off government debt would cause “significant damage” to the economy.
“It’s very important that the debt is raised on time so that the United States can pay its debts on time,” Jerome Powell said as the central bank concluded its September meeting. Failure to pay, he added, “is not just something we can imagine.”
Powell’s advice came after six U.S. Treasury secretaries again urged the Senate to overcome the situation “without delay” to avoid a dangerous collapse if Washington does not pay its debt.
However, the call for immediate action appears to have fallen on deaf ears, as the leader of the opposition Senate has strongly refused to work with the ruling Democrats to increase debt.
That could lead to financial market turmoil, officials warn.
The House of Representatives led by the Democratic Alliance has approved an action that will limit the debt limit until after the mid-year elections next year and subsidize government operations until December 3.
But now it is stuck in the Senate, until September 30 to take steps to avoid closure and a second deadline in mid-late October to stop debt payments.
Powell warned that “no one should assume that the Fed or anyone else can protect markets or the economy in the event of a failure” by the United States to repay its debts.
And a group of former finance ministers – who served under President Jimmy Carter, George W. Bush, Bill Clinton and Barack Obama – said in a letter to congressional leaders of both parties that even a temporary failure could threaten economic growth.
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“This poses a threat to volatile markets, as well as to the deterioration of economic confidence, and will prevent Americans from accessing essential services,” they warned.
“It can be very damaging to undermine complete trust in the United States, and this damage can be difficult to repair,” officials said.
They said defending the immovable debt in the United States was “a sacred duty.”
‘Different this time’
But Republican Senate leader Mitch McConnell continues to use the debt limit as a political pledge against President Joe Biden’s spending plans – even though he claims to have raised the cap under former president Donald Trump.
“If the Washington Democrats want to get into the billions of dollars and spend recklessly alone, they can raise the debt limit, on their own,” he said on the Senate floor Wednesday.
Under Trump, the roof was suspended for two years, but was restored on August 1 with a $ 28.4 trillion debt.
The deadline for debt is approaching as Democrats hope to secure a quick $ 3.5 trillion social policy policy by party vote, without having to deal with Republicans.
The bill itself is plagued by common internal conflicts, however, those who have a degree of concern about the high price of tickets, and the progress that seeks an agreement are in the pockets before considering other important factors in spending, such as infrastructure.
Biden invited two lawmakers from the opposition party and left the White House on Wednesday with the aim of building a coalition package, which would make for the use of one of the largest funds in U.S. history.
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“People are wondering why it is so different now, considering that in the last 80 years the debt has increased 98 times,” Senate Republican Conference chairman John Barrasso told a news conference.
“Well, it’s different this time because Democrats spend all the money. They propose billions and billions of dollars spent without a single vote of the Republic.”
Senator Mike Lee accused Democrats of trying to “take their cake and eat it,” by demanding a credit increase rather than a solitary confinement.
“They have vote-raising votes, if that’s what they want to do. They don’t want to do it without Republican votes,” he said.
“Interestingly, however, they have simply lost three and a half trillion dollars in the American economy without a single Republican vote.”