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Janet Yellen warns debt default would undermine US leadership and raise national security concerns

Treasury Sec. Janet YellenTreasury Secretary Janet Yellen.

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  • A debt default would damage US global leadership, Treasury Secretary Janet Yellen warned.
  • It would also “raise questions about our ability to defend our national security interests,” she added.
  • Speaking in Japan at a G7 meeting, Yellen said a US default would trigger a global economic downturn.

Treasury Secretary Janet Yellen warned Thursday that a US debt default would spoil America’s standing internationally and potentially raise security concerns.

Speaking in Japan at a G7 meeting, she said a default would trigger a global economic downturn.

“It would also risk undermining US global economic leadership, and raise questions about our ability to defend our national security interests,” she said.

Early this month, Yellen said the government could default on its obligations by early June if Congress does not step in to raise or address the debt ceiling. More recently, Yellen has also begun counseling business executives on the dangers of a default.

This comes as lawmakers remain deadlocked over lifting the $31.4 trillion debt limit, with Republicans in Congress only willing to raise it if spending cuts are implemented and the White House demanding no conditions.

Key lawmakers are gearing up for a Friday meeting to continue negotiations, after Tuesday’s session failed to yield any meaningful progress.

On Thursday, Yellen once again reiterated the severe consequences of allowing the US to default.

“Millions of Americans could lose their jobs, household incomes would be reduced. American businesses would see credit markets deteriorate, and millions of American families that receive government payments would likely be left without the resources that they were promised,” she said.

Responding to a question, she suggested that a permanent elimination of debt limit caps could provide a long-term fix, or rules could be changed around how the ceiling is handled. 

Yellen’s warnings about damage to the US security stood alongside alarms raised last week by Avril Haines, the director of national intelligence. 

Speaking in front of a Senate committee, she cautioned that Russia and China would take advantage of a default to highlight the US as chaotic.

“Almost certainly it would create global uncertainty about the value of the US dollar and US institutions and leadership, leading to volatility in currency and financial markets and commodity markets that are priced in dollars,” she said.

Read the original article on Business Insider