US Treasury Secretary Janet Yellen has called for a new fiscal policy system to avoid future debt ceiling showdowns, as the US faces an imminent default if Congress fails to reach a deal.
At a Group of Seven meeting in Japan, Yellen suggested that Congress could repeal the debt ceiling or give the President the power to raise it, with lawmakers having the ability to veto the decision.
Yellen proposed this alternative system after informing lawmakers that the US would be unable to meet its obligations as early as June 1, putting pressure on Congress and the White House to find a solution, according to The Hill.
The Treasury Secretary remarked that it is "tremendously damaging" to endure standoffs every few years.
The US has run up against its borrowing limit nearly 80 times since 1960, according to Janet Yellen. For now, she said that raising the debt ceiling is the only short-term solution to avert a default.
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Serious Consequences
Ahead of a meeting of the Group of Seven advanced economies in Japan, Treasury Secretary Janet Yellen expressed reluctance to discuss potential actions if the debt ceiling is not raised in time to avoid a default, stating that there is "no good alternative" that will save the United States from disaster.
The only reasonable solution, Janet Yellen said, is to raise the debt ceiling and avoid the severe consequences of not doing so. According to an analysis conducted by the White House, a default of short duration would result in the loss of 500,000 jobs, while a more prolonged default could result in the loss of 8.3 million jobs, which is almost equivalent to the number of jobs lost during the 2008 financial crisis, per ABC News.
Yellen remains hopeful that the differences can be resolved but acknowledged discussions regarding the possibility of invoking the 14th Amendment of the US Constitution, which would allow for the issuance of debt needed to pay all of the government's bills and ignore the debt ceiling, per Republic World.
However, Janet Yellen noted that the concept is not a short-term solution, and its legal viability is questionable.
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