by David Lawder
NUSA DUA, Indonesia (Reuters) – The U.S. Treasury Secretary has warned that a failure by lawmakers to agree on raising the debt ceiling would pose a “huge threat” to the U.S. credit rating and US financial markets, in the run-up to a divided Congress.
Janet Yellen told Reuters in an interview in New Delhi on Friday that cooperation was still possible with Republicans on some issues, but raising the debt ceiling was a non-negotiable point.
Some Republicans have threatened to use the upcoming $31.4 trillion debt ceiling hike as leverage to force Democratic President Joe Biden to make concessions.
U.S. public debt stood at $31.2 trillion on Wednesday and, without an increase, analysts forecast a potential default by the third quarter of 2023.
Republicans, who regained control of Congress in the 2010 election, brought the United States to the brink of default by demanding spending cuts the following year, leading to the first-ever debt rating cut US Treasury by Standard & Poor’s.
Asked whether the Democrats should pass any laws in the post-election session, when they would still retain a majority through January, regardless of the outcome of the election, Janet Yellen said it was urgent need to raise the debt ceiling.
“I think it’s irresponsible not to raise the debt ceiling. It’s always been raised,” the Treasury Secretary said.
“It would be a huge threat to the country not to, and completely irresponsible to threaten America’s credit rating and the functioning of the most important financial market.”
A US Treasury official said the department would be happy to see the measure passed before the newly elected Congress convenes in January, adding: “It has to be done.”
BIPARTISAN WORK ALWAYS POSSIBLE
Janet Yellen said she would defend the recently passed measures against Republicans who want to gut some of Joe Biden’s spending and tax policies.
“We will definitely try to protect the gains we’ve made over the last year and a half,” she said.
If Republicans manage to take control of the House and Senate, some of them have vowed to pass legislation to make Donald Trump-era tax cuts permanent and roll back parts of the bill that allocates $430 billion to green energy and healthcare subsidies passed by Democrats
Janet Yellen, who is currently attending meetings ahead of the G20 summit in Indonesia, was speaking ahead of the re-election of Democratic Senator Mark Kelly in Arizona. The Democrats are thus one seat away from retaining a majority in the Senate.
In the House, Republicans won 211 seats, seven short of a majority of 218 seats.
The administration will seek measures likely to win bipartisan support, said the Treasury secretary, who recalled that some Republicans supported the infrastructure law last year and investments in semiconductors and research this year.
COMPREHENSIVE TAX AGREEMENT
Another potential point of contention is the implementation of a minimum corporate tax of 15%.
“I want this done. I wish the United States had been the first to do it. It didn’t happen,” said Janet Yellen, who helped negotiate the NATO accord. last year.
According to her, most countries in the European Union will apply the minimum rate of 15% for companies, which means that American companies which currently pay taxes of 10.5% abroad could end up paying the difference to these governments, perhaps from 2024.
“And eventually, as they do, the pressure will increase on the United States to come into compliance as well.”
(Report David Lawder; French version Kate Entringer)
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