Politics Yellen pleads with Congress to raise debt ceiling, avoid 'unthinkable' default
Concerns Mount Over Looming Surge in Bankruptcy as COVID Medical Debt Soars
A recent 30 percent increase in bankruptcies could be a harbinger of more financial pain to come as millions of Americans grapple with rising medical debt from COVID treatment. Says one expert: "It's going to get ugly."As many as 12.5 million Americans could already be saddled with COVID-related medical debt, based on a LendingTree survey conducted in March. The nationally representative poll found that 60 percent of the respondents polled had medical debt, with about 10 percent stemming from the virus; the amount typically owed ranged from $5,000 to $9,999. That suggests the collective debt for COVID treatment so far could be between $60 billion and $125 billion.
Treasury Secretary Janet Yellen implored lawmakers Wednesday to suspend the legal limit on how much debt the U.S. can owe before it kicks back in on Aug. 1, warning that failure to do so "would have absolutely catastrophic economic consequences."
In testimony before a Senate subcommittee, Yellen urged Congress to make sure the U.S. does not default on its debt by raising and suspending the so-called debt ceiling. A two-year deal to suspend the debt limit expires after July 31, at which point the Treasury Department would have to take "extraordinary measures" to prevent the U.S. from defaulting.
Yellen: administration is watching inflation closely
WASHINGTON (AP) — Treasury Secretary Janet Yellen assured Congress that the recent jump in inflation is being monitored very carefully by the Biden administration, but said again that any increase will prove temporary. Testifying about Biden's $6 trillion budget proposal before the Senate Finance Committee, Yellen was asked Wednesday by Republican lawmakers about recent sharp gains in inflation, including a 5% rise in consumer prices for the 12 months ending in May, the biggest jump since 2008. Yellen said no one wants to relive the double-digit inflation of the 1970s and that the administration is taking the recent inflation “very seriously.
"I believe it would precipitate a financial crisis, it would threaten the jobs and savings of Americans, and at a time when we're still recovering from the COVID pandemic," Yellen said of a default on the U.S. debt.
"I would plead with Congress simply to protect the full faith and credit of the United States by acting to raise or suspend the debt limit as soon as possible."
Yellen's plea comes as Republican lawmakers warn that they will not support a suspension of the debt ceiling unless President Biden and Democrats agree to cut spending or take other debt reduction measures. Senate GOP leaderslast week that they don't expect enough Republicans in the upper chamber to support a clean debt ceiling increase to avert a filibuster.
There’s a 4 million home shortage. Can the federal government help fix the problem?
Memo to policymakers: The country is running out of homes.Traditionally, the federal government’s housing policies have been demand-side interventions. Things like the mortgage interest deduction, which reduces homeowner’s taxes (stimulating demand) or the Fed buying up over a trillion dollars in mortgage bonds to help bring down mortgage rates (also stimulating demand). These types of policies are broadly popular since they help people afford something expensive. But they don’t do anything to reduce the cost of housing.
Democrats and Republicans have squared off over the debt ceiling several times over the past decade and briefly allowed the U.S. to surpass it during the Trump administration. Yellen warned Wednesday, however, that the economic impact of COVID-19 has limited Treasury's ability to know how long it can avert a default.
"We can't tolerate any chance of defaulting on the government debt, and there is a lot of uncertainty. It's possible that we could reach that point," Yellen said.
If the U.S. defaults on its debt, trillion of dollars in Treasury bonds held by foreign governments and investors could go from nearly as safe as cash to potentially irredeemable. Experts warn that such an occurrence could trigger a global financial crisis given how much of global commerce is underpinned by the U.S. dollar.
On The Money: Biden announces bipartisan deal on infrastructure, but Democratic leaders hold out for more .
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