US Treasury Secretary Janet Yellen warned on Tuesday that if Congress does not raise the US government’s so-called “debt ceiling”, it will trigger an “economic disaster”, Reuters reported.

In comments made during a meeting in Washington with representatives of the American business community, Yellen said that a US default would lead to job losses at the same time that the Fed, the US central bank, would need to raise key interest rates, a move that would raise rates on homes, cars and credit cards. cards

She stressed that raising or suspending the U.S. government debt ceiling, which currently stands at $31.4 trillion, is a “primary responsibility” of Congress, warning that otherwise all the progress the U.S. economy has made will be undone. after the COVID-19 pandemic.

“Default would lead to economic and financial disaster,” she said, adding that such a situation would also lead to an “indefinite” increase in the interest rates at which the United States could borrow in financial markets.

“If the debt ceiling is not raised, American businesses will face a worsening credit outlook, and the government will likely be unable to make payments to military families and retirees who rely on Social Security (the program through which the US government guarantees pensions to the vulnerable ). People)”.

“Congress must vote to raise or suspend the debt limit. They must do so without conditions. And they shouldn’t wait until the last minute,” urged Janet Yellen.

Her comments came after she told US congressmen in January that President Joe Biden’s administration would only be able to meet the payment commitment until early June unless they vote to raise the cap.

New controversies over the US debt ceiling

Unlike most developed countries, the US has limits on the level of public debt it can achieve. Because the U.S. government has been spending more than it needs for decades, the cap must be continually raised because it requires congressional approval.

In years when the White House, the US state executive branch, and Congress, the federal legislature in Washington, are under different political controls, negotiations over raising the debt ceiling are often fraught with political battles, so Yellen’s warning is nothing new.

Such a dispute between Republicans and Democrats also took place two years ago, Yellen also warned then about the danger of US default.

But this year’s clash between President Biden’s Democratic administration and the Republican-controlled House of Representatives has been more worrying than usual, with neither side showing any willingness to compromise.

The situation has prompted insurers to charge the highest premiums in decades to insure US debt, and financial analysts warn that the risk of a default is rising.