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Treasury Secretary Yellen says China will be the first to be paid under GOP debt ceiling plan

PoliticsWorld PoliticsTreasury Secretary Yellen says China will be the first to be paid under GOP debt ceiling plan

US Treasury Secretary Janet Yellen sits to testify before a Senate Finance Committee hearing on US President Joe Biden’s proposed budget request for fiscal year 2024 on Capitol Hill on March 16, 2023 in Washington, US.

Mary F. Calvert | reuters

WASHINGTON – Treasury Secretary Janet Yellen said Thursday that China would be the first in line to receive payments under a Republican proposal to prioritize some US debt obligations over others, calling it a “dangerous idea” that technically will cause the company to default on its loan. Bond.

House Republicans are organizing a bill to raise the US debt ceiling, which in January surpassed the $31.4 trillion borrowing limit. They want any agreement on the debt ceiling to be coupled with spending cuts on social programmes.

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His latest debt ceiling proposal, which passed 21-17 Outside the House Ways and Means Committee last week, it will prioritize which payments the US Treasury makes first when the US hits the ceiling at which it can issue no more bonds. The GOP plan gives higher priority to public debt obligations and Social Security payments than to other types of government obligations.

Yellen said during a Senate Finance Committee hearing on the federal budget, “The government makes millions in payments every day, on average, and our systems are designed to pay all of our bills on time, not to pick and choose which.” Which bills to pay.” “There’s a reason Treasury secretaries from both parties have rejected this incredibly risky and dangerous idea as something that’s never been tried before.”

Treasury Sec.  Yellen: Our banking system remains sound

Democrats have pointed out that the Republican plan to prioritize payments would benefit Wall Street and China, since they hold the majority of government bonds. China has a debt of about US$ 1 trillionAbout 3% of all US debt outstanding.

“If Treasury follows this Republican plan, keeping in mind that China holds $1 trillion in US debt, who will pay it off first?” asked Sen. Sherrod Brown, D-Ohio.

“Well, if it was prioritized, China would get paid ahead of them,” Yellen said, referring to senior citizens receiving Social Security and veterans receiving VA benefits. She said debt priority is “default by another name.”

economists have called for the suggestion pay off some debts owed by the government to others “Badly Misguided.”

Yellen told lawmakers, “I cannot give any assurances about the technical feasibility of such a plan.” “This would be an extraordinarily risky, untested and radical departure from the normal payment practices of agencies in the federal government.”

He said lawmakers need to recognize that “they have a responsibility to raise the debt ceiling to protect the full faith and credibility of the United States of America.”

Treasury Department has taken the initiative temporary measure That includes suspending new investments in some federal retirement programs and health benefit funds, in recent months, to avoid default. The measures are due to expire in June.

Yellen said, “We need to pay our bills. We need to pay all of our bills. Willingness and commitment to be responsible in paying bills that have already been spent will contribute to the strong credit rating of the United States.” is the basis of.”

“If we fail to pay any of our bills, it will question whether or not we deserve our current credit rating. And it’s a recipe for economic and financial disaster if we can’t pay some of our bills.” And not all of them,” he added.

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