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Tag: economic crisis
Yellen: Debt Default Would 'Permanently' Weaken America

Yellen: Debt Default Would 'Permanently' Weaken America

By David Lawder

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen issued a fresh plea for Congress to raise the federal debt ceiling on Sunday, arguing a default on U.S. debt would trigger a historic financial crisis.

In a Wall Street Journalopinion piece , Yellen said that the crisis triggered by a default would compound the damage from the continuing coronavirus pandemic, roiling markets and plunging the U.S. economy back into recession at the cost of millions of jobs and a lasting hike in interest rates.

"We would emerge from this crisis a permanently weaker nation," Yellen said, noting that U.S. creditworthiness has been a strategic advantage.

Yellen did not offer a new timeline for a possible default, but described economic damage that would fall on consumers through higher borrowing costs and lower asset prices.

She has said previously that a default could come during October when the Treasury exhausts its cash reserves and extraordinary borrowing capacity under the $28.4 trillion debt limit.

"We can borrow more cheaply than almost any other country, and defaulting would jeopardize this enviable fiscal position. It would also make America a more expensive place to live, as the higher cost of borrowing would fall on consumers," Yellen wrote. "Mortgage payments, car loans, credit card bills—everything that is purchased with credit would be costlier after default."

Republicans have refused to support raising or suspending the $28.4 billion. Senator Bill Cassidy from Louisiana said earlier on NBC's "Meet the Press" program that Democrats want to increase the borrowing cap to fund trillions of dollars in "Democratic wish list" spending.

Yellen argued the debt ceiling is about paying for past spending obligations, and said waiting too long to lift the debt ceiling can still cause damage, citing a 2011 debt ceiling crisis that pushed the federal government to the brink of default that prompted a credit rating downgrade.

"This led to financial-market disruptions that persisted for months. Time is money here, potentially billions of dollars. Neither delay nor default is tolerable."

House of Representatives Speaker Nancy Pelosi, in a statement, cited Yellen's past remarks on the issue and noted that Congress addressed the debt ceiling on a bipartisan basis three times during the Trump administration.

"When we take up the debt limit this month, we expect it to be bipartisan once more," Pelosi said.

Still, House Majority Whip Jim Clyburn on Sunday that Democrats may have to pass the debt ceiling hike without Republican support.

"I think we ought to do what's necessary and message to the American people exactly who is trying to destroy this great democracy that we hope to keep in place," he told CNN.

(Reporting by David Lawder and David Shepardson; Additional reporting by Phil Stewart; Editing by Diane Craft and Daniel Wallis)

It’s Still The Economy, Stupid

As he stood before the old Arkansas Statehouse on Saturday afternoon, talking to thousands of cheering friends and supporters about the meaning of the presidential campaign they began twenty years ago, Bill Clinton seemed to identify with Barack Obama.

“Now the big challenge to our perfect union once again is a terrible economic crisis, different, deeper, and more difficult than the one I faced,” he said. “Another young president is facing similar challenges … and underlying those challenges is the same old debate about whether government is the problem or whether we need smart government in a changing economy, working together to create the opportunities of tomorrow.”

On many occasions during the weekend reunion of Clinton’s 1992 campaigners and former White House staffers in Little Rock, the former president voiced support for the current one, and concern for the predicament he confronts. But what was just as striking as Clinton’s empathy was the anxiety among those who had once worked for him, who are deeply worried about the isolation and inertia they perceive in the Obama White House, and what that may portend for next year’s election. There is almost nothing they desire more than success for their adversary of four years ago. They still believe — with ample reason — that both the ’92 campaign and the administration that followed offer significant clues to the renewal of Obama’s chances. (The Clinton foundation commissioned a collection of essays written for the occasion by the likes of Chelsea Clinton, Sidney Blumenthal, historians Sean Wilentz and Ted Widmer, and Center for American Progress President John Podesta, among others, that suggests just how relevant those ideas remain today.)

At the two poles of the Clinton camp are the president himself, who has repeatedly and publicly offered the most positive outlook on Obama, and James Carville, the irrepressible political consultant, media personality, and captain of the ’92 team, who recently warned, with characteristic restraint, that Obama’s declining polls are cause for “panic” and staff firings, at the very least. While the other Clinton veterans may have wanted to laugh at Carville’s outburst, they couldn’t this time — because he articulated what they have been silently thinking. Most agree with the simple advice on a big button available at Carville’s steakhouse reception last Saturday night: “It’s Still the F—ing Economy, Stupid!”

That seems obvious enough, of course, if not a worn cliche. The question is what, if anything, Obama can do about it. From Carville’s perspective, the tax cuts and infrastructure spending of the American Jobs Act probably won’t cure what is driving down the president’s numbers. And while Clinton has endorsed the legislation as “a good plan,” he clearly agrees it isn’t enough, not only because the response is not sufficient to the crisis, but because the White House persistently fails to mount a persuasive case for itself and against its foes. Repeatedly over the weekend, Clinton urged that Democrats learn how to respond to the anti-government rhetoric of the Tea Party Republicans with a forceful, emotional storyline. At a panel discussion sponsored by the Clinton School of Public Service on Friday evening, he first listened as Carville and other veterans of his first campaign held forth. Then he seized the microphone to talk again about the topics that have been preoccupying him since the midterm debacle of November 2010:

“We need a coherent narrative. The No. 1 rule of effective politics, especially if the people you’re running against have a simple narrative — that government is always the problem, there is no such thing as a good tax or a bad tax cut, there’s no such thing as a good program or a bad program cut, no such thing as a good regulation or a bad deregulation — if you’re going to fight that, your counter-[argument] has to be rooted in the lives of other people.”

Acknowledging that the radical right has tapped into a powerful, traditional suspicion of government in America, he said, “When the Tea Party started out, at least they were against unaccountable behavior from top to bottom. … If you want to go against that grain, you’ve got to tell people you understand it’s a privilege and a responsibility to spend their tax money — but there are some things we have to do together. And that’s the purpose of government, to do the things we have to do together that we can’t do on our own. If we can make that choice credible, then our candidates, starting with the president, and our principles, will be fine.”