The White House says no to minting a $1 trillion coin to sidestep McConnell and ease debt ceiling standoff in Congress

Joe Biden
President Joe Biden delivers remarks on his plan to stop the spread of the Delta variant and boost COVID-19 vaccinations, in the State Dining Room of the White House complex on Thursday, Sept. 9, 2021 in Washington, DC.

  • The White House rejected the idea of minting a coin to circumvent Congress and avoid a default if necessary.
  • “There is only one viable option to deal with the debt limit: Congress needs to increase or suspend it,” a White House spokesman said.
  • Experts say the Treasury Department has the ability to mint a coin of any denomination, and theoretically use it to avert default.
  • See more stories on Insider’s business page.

The White House on Monday again ruled out minting a “trillion-dollar coin” to sidestep GOP refusals to aid Democrats on raising the debt ceiling, as the standoff in Congress over who bears responsibility for paying America’s bills appeared to worsen with no resolution in sight.

“There is only one viable option to deal with the debt limit: Congress needs to increase or suspend it, as it has done approximately 80 times, including three times during the last Administration,” White House spokesperson Mike Gwin said in a statement to Insider.

Politico first reported the Biden administration rejecting the step.

It closes off one avenue for the White House to defuse the tension as lawmakers barreled towards a potentially devastating default. Experts say the Treasury Department has the ability to mint a coin of any denomination, which could theoretically be applied here to avert a political showdown ending in default.

Congressional Republicans, spearheaded by Senate Minority Leader Mitch McConnell, are digging in on their rejection to renew the US’s ability to continue paying its bills, known as the debt ceiling.

Republicans argue it’s up to Democratic lawmakers to raise it to cover their planned $3.5 trillion social spending plan, along with the $1.9 trillion stimulus law from earlier in the year. Democrats are rebuffing that, entrenched in their belief that Republicans shouldn’t shirk from their responsibility.

Lifting the nation’s borrowing cap allows the US to pay its bills for past spending and does not grow the national debt.

Republicans raised or suspended the debt ceiling three times during the Trump administration. The national debt grew by $7.8 trillion as both parties struck budget deals adding to domestic and defense spending, and stepped in with emergency aid last year when the pandemic slammed into the economy. Republicans under President Donald Trump approved a tax cut that grew the national debt by $2 trillion.

The Treasury Department is conserving cash as part of a set of “extraordinary measures” aimed at keeping the US afloat for a limited time. But experts say the agency is about to exhaust its abilities, setting the stage for a default that could cause financial chaos and even spark a recession.

Treasury Secretary Janet Yellen implored Congress in a Wall Street Journal op-ed published Sunday to take action on the debt ceiling. She warned a default could cause up to 50 million seniors to face an abrupt halt to Social Security checks, missed paychecks for US troops, and delays in monthly child tax credit checks.

House Speaker Nancy Pelosi said Sunday in a letter to Democrats they’re seeking to enlist GOP lawmakers. That could potentially be in a short-term government funding bill to avert a shutdown after September 30. “When we take up the debt limit this month, we expect it to be bipartisan once more,” she said.

Still, senior Democrats aren’t ruling out raising it on their own in a party-line vote using the reconciliation process, the same route being employed for their social spending plan. “I’m not fine with that but if that’s what it takes, that’s what it will take,” House Democratic Whip Jim Clyburn said in a Sunday interview on CNN’s “State of the Union.”

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Failure to raise the debt ceiling will delay child tax credit payments and Social Security checks, causing ‘economic catastrophe,’ Janet Yellen says

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Janet Yellen.

  • Treasury Sec. Janet Yellen warned of an “economic catastrophe” if the debt limit isn’t raised.
  • In a WSJ opinion piece, she it would delay needed Social Security benefits, among other things.
  • Despite calls for bipartisan support, the GOP vowed Democrats will have to raise the limit alone.
  • See more stories on Insider’s business page.

Earlier this month, Treasury Secretary Janet Yellen wrote a letter to congressional leadership stressing the urgency of raising the debt limit, given that the government’s money will likely run out in October due to financial uncertainty caused by the pandemic.

With October just 10 days away, Yellen doubled down on the need for Congress to act quickly, citing how failure to raise the limit will hurt Americans across the country.

“In a matter of days, millions of Americans could be strapped for cash,” Yellen wrote in an opinion piece for The Wall Street Journal. “We could see indefinite delays in critical payments. Nearly 50 million seniors could stop receiving Social Security checks for a time. Troops could go unpaid. Millions of families who rely on the monthly child tax credit could see delays. America, in short, would default on its obligations.”

The White House last week expressed the same concerns as Yellen, warning in a memo to state and local governments that a government default could lead to potential big cuts in measures like Medicaid and free school lunches.

After Congress missed a July 30 deadline to raise or suspend the debt ceiling, the US Treasury employed “extraordinary measures” to keep paying off the government’s bills, but as Yellen warned in her letter to Congress, those measures will likely run out next month, warranting speedy, bipartisan action to prevent a government default.

Insider’s Joseph Zeballos-Roig and Andy Kiersz reported on another extraordinary measure that Treasury could turn to: minting a platinum coin worth $1 trillion. Treasury officials have long ruled this out, however. Yellen’s tone on that matter was unchanged in her opinion article.

“Paying America’s bills shouldn’t be a controversial issue,” Yellen wrote. But right now, it is. Republican lawmakers vowed Democrats will have to go at it alone, with 46 of them last month signing a letter agreeing they would not play a part in raising the debt ceiling given Democrats’ “irresponsible spending” with their $3.5 trillion social spending bill.

Senate Minority Leader Mitch McConnell reinforced his party’s position on the debt limit last week, telling Punchbowl News that it’s Democrats’ obligation to ensure the government doesn’t default.

“They should step up. It’s hard being in the majority. They are the ones who will raise the debt limit,” he said, adding, “Do you guys think I’m bluffing?”

But Speaker of the House Nancy Pelosi said in a Sunday letter that raising the limit “has long been bipartisan,” and she wants that to remain the case.

“Indeed, since 2011, every time the debt limit has needed to be raised, Congress has addressed it on a bipartisan basis, including three times during the last Administration,” Pelosi wrote. “When we take up the debt limit this month, we expect it to be bipartisan once more.”

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Janet Yellen says she wouldn’t be Treasury Secretary today if she ‘didn’t have an excellent babysitter 40 years ago’

Janet Yellen smiling in front of a microphone
Janet Yellen.

  • Treasury Sec. Janet Yellen credits “excellent” childcare for her professional success.
  • She urged Congress to invest in affordable childcare in the $3.5 trillion social spending bill.
  • The Treasury released a report on Wednesday detailing the lack of accessible childcare for parents.
  • See more stories on Insider’s business page.

Janet Yellen is the first female Treasury Secretary of the US, but she said it might not have been possible without the childcare made available to her after giving birth to her son four decades ago.

“Looking back, I’m not sure I would be here, in this job today, if I didn’t have an excellent babysitter 40 years ago,” Yellen said during remarks on Wednesday on shortages in the childcare system.

Yellen joined Vice President Kamala Harris at the Treasury Department in urging for increased investments in childcare, and she said that while she was lucky to have given her son great childcare, it is certainly not the norm for most families today. The Treasury released a report on Wednesday that found parents need childcare at a time when they can least afford it – right when they give birth – and there is currently no funding mechanism, stressing the need for reform.

“For the vast majority of Americans, the child care industry works in precisely the opposite way it worked for us, which is to say it doesn’t work at all: Those who provide child care aren’t paid well, and many who need it, can’t afford it,” Yellen said.

House Democrats recently unveiled their plan to invest $761 billion to make childcare more affordable as part of their social spending bill, which included a universal pre-K for three- and four-year-olds and investments to ensure children do not go hungry. It also includes a cap on families’ spending on childcare at 7% of income so anyone who wants care can afford it, regardless of how much money they make.

Insider reported on Tuesday that 110 economists echoed Yellen’s calls in a letter stressing the importance of affordable childcare in Democrats’ $3.5 trillion social spending bill. Betsey Stevenson, a top economist under Obama and one of the letter’ signatories, told Insider in an interview that the “fundamental flaw” in childcare is the lack of investment.

“What we have done is create a nation of kids who are underinvested in, and that feeds into not just what our potential is as an economy, but it also feeds into inequality,” Stevenson said.

Democrats are in the process of debating elements of the reconciliation bill, including an expanded $300 monthly child tax credit, but where benefits for children and families stand remain uncertain given hesitation from centrist lawmakers, like West Virginia Sen. Joe Manchin, who wants a work requirement for the benefits.

But Yellen said during her remarks it’s “past time that we treat child care as what it is – an element whose contribution to economic growth is as essential as infrastructure or energy.”

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Treasury Secretary Janet Yellen will reportedly back Jerome Powell for another term as Fed Chair

U.S. Federal Reserve Chair Janet Yellen (L) congratulates Fed Governor Jerome Powell at his swearing-in ceremony for a new term on the Fed's board, in Washington in this handout photo taken and released June 16, 2014. REUTERS/U.S. Federal Reserve/Handout via Reuters
U.S. Federal Reserve Chair Yellen congratulates Fed Governor Powell at swearing-in ceremony in Washington

  • Janet Yellen will support another term for Jerome Powell as Fed chair, Bloomberg reported Saturday.
  • Powell succeeded Yellen as the head of the US central bank.
  • Biden is expected make a decision in the coming days.
  • See more stories on Insider’s business page.

Treasury Secretary and former Chair of the Federal Reserve Janet Yellen will support another term for her successor Jerome Powell as head of the US central bank, according to a report from Bloomberg on Saturday.

Yellen made such comments to senior White House advisors, Bloomberg reported, citing people familiar with the matter.

Powell’s four-year term as Fed chair will end in early 2022. President Joe Biden, who has the responsibility of appointing the chair of the Fed, will reportedly make a decision on the matter in coming days.

Yellen, who was appointed chair of the Fed under President Barack Obama and then-Vice President Joe Biden, was appointed by Biden to the Treasury Secretary position. She thus presumably holds some degree of influence over the decision Biden will make.

The chair of the Fed is arguably the top economic policymaking position in the world as that person oversees the world’s largest and most influential economy. The chair, alongside other members of the central bank’s Federal Open Market Committee, plays a major role in setting interest rates and conducting asset purchases that provide liquidity to markets.

Powell, who was appointed by President Donald Trump in early 2018, has overseen the central bank and its policy during the economic mayhem caused by the coronavirus pandemic. As the world shut down and economic activity came to halt, sending unemployment rates to frightening levels, Powell and the FOMC cut interest rates to near-zero and started a mammoth quantitative easing program in which the country essentially buys its own debt. This has helped the economy and financial markets bounce back.

Now, the central bank is in the midst of deciding when, to what degree, and at what pace they will tighten monetary policy.

Some within the Fed, as well as some outside observers, believe the bank should start tapering asset purchases soon. Others take a more dovish stance, not wanting to risk an self-inflicted economic downturn. The next chair of the Fed, Powell or not, will have the difficult task of navigating the delicate economic environment.

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Biden won’t extend $300 boost to weekly unemployment benefits past September

Joe Biden
President Joe Biden.

  • Janet Yellen and Marty Walsh confirmed Biden’ won’t extend federal unemployment benefits past September.
  • They wrote in a letter that Biden still supports states using stimulus funds to help the unemployed.
  • 26 states, all but one governed by Republicans, moved to end the unemployment boost early.
  • See more stories on Insider’s business page.

As part of his American Rescue Plan, President Joe Biden extended $300 weekly unemployment benefits through September 6. Top officials in his administration confirmed on Thursday that he won’t be extending the benefits any further.

Treasury Secretary Janet Yellen and Labor Secretary Marty Walsh wrote a letter to the chairs of the House and Senate finance committees with an update on where unemployment benefits stand. They wrote that although the weekly benefits have been a “critical lifeline” for millions of unemployed Americans, a further extension of the benefits – which some Democrats have been pushing for – is off the table.

“The temporary $300 boost in benefits will expire on September 6th, as planned,” Yellen and Walsh wrote. “As President Biden has said, the boost was always intended to be temporary and it is appropriate for that benefit boost to expire.”

However, the officials noted that even as the economy is recovering from the pandemic and payrolls are being added to the labor market, unemployed people may still require financial assistance, and the Delta variant could bring economic setback, as well.

That’s why they said the Labor and Treasury Departments will take the following steps to help those are unemployed:

  1. The Treasury is reaffirming that states can use what they received from the $350 billion in stimulus aid to provide additional support for unemployed people beyond the expiration of the benefits;
  2. Labor will communicate with states on how they can best use their “existing UI (unemployment insurance) infrastructure” to support state-funded benefits using stimulus funds;
  3. And Labor is announcing $47 million in new grants to support reemployment services for all Americans.

Yellen and Marsh also wrote the pandemic has exposed “serious problems” in the UI system that requires reform, which is why Biden is asking Congress to consider long-term reform of UI in Senate Democrats’ $3.5 trillion reconciliation bill.

“The President has already laid out his principles for such reform: he believes a 21st century UI system should prevent fraud, promote equitable access, ensure timeliness of benefits, provide adequate support to the unemployed, and automatically expand benefits in a recession,” they wrote.

After a weak April jobs report, 25 GOP-led states – and one governed by a Democrat, Louisiana – moved to end unemployment benefits early for their residents because they believed the benefits disincentivized work. According to an analysis from the left-leaning People’s Policy Project, over 20 million Americans will lose their benefits when the September expiration rolls around.

Insider’s Joseph Zeballos-Roig and Juliana Kaplan reported that the Delta variant has people begging for more benefits, given that the variant could jeopardize the return to work. But even before Yellen and Walsh’s announcement, moderate Democrat Joe Manchin of West Virginia told Insider he would not support a further extension of the benefits in a reconciliation bill, suggesting a slim likelihood of it passing through Congress.

“I’m done with extensions,” he said. “The economy is coming back.”

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Janet Yellen has 3 reasons why Biden’s trillions in spending won’t destroy the economy

Janet Yellen
Janet Yellen.

  • The Senate recently approved two spending packages totaling close to $4 trillion.
  • Treasury Sec. Janet Yellen wrote in an opinion piece that investments are making up for 40 years of underspending.
  • She said Biden’s economic agenda is “fiscally responsible” and paid for by reforming the tax code.
  • See more stories on Insider’s business page.

Last week, the Senate approved the $1 trillion bipartisan infrastructure plan, and Senate Democrats passed their $3.5 trillion reconciliation bill, full of measures like childcare, eldercare and universal pre-K. Biden’s Treasury Secretary Janet Yellen said those investments are just the things Americans need right now.

Yellen wrote an opinion piece for Yahoo Finance on Tuesday explaining why President Joe Biden’s economic agenda to boost the middle class and create jobs is not too much spending, contrary to Republican lawmakers’ arguments. She noted that 40 years of underinvesting in public goods, such as national paid leave and childcare, have pushed women out of the labor force and increased racial and gender pay gaps, and Biden’s economic plans would give Americans the economy they “should – and can – have.”

“I question whether we can if we remain a country where renting a home eats up the lion’s share of your paycheck, and owning one is out of the question; where young people can’t gain the skills to compete in the job market because they can’t afford the tuition bill; or where Americans must make a choice: have children or have a job,” Yellen wrote.

Here are three reasons why the trillions in spending Biden has proposed is not an over-investment, according to Yellen:

Real interest rates are negative

Now is the right time, economically, to be making these investments. Real interest rates are negative, meaning borrowers are credited interest instead of paying it to lenders, and the Congressional Budget Office expects interest rates to stay low for at least a decade.

Low interest rates mean more money to spend by consumers, and this could help boost the economy if they use the money to make large purchases on things like homes and cars. So, to Yellen’s point, Biden’s investments will help further boost the economy given the current and expected low interest rates.

Tax increases will go to the wealthy and corporations, not American families

Biden’s proposals are “fiscally responsible,” Yellen wrote. The investments are spread out over time and are paid for by raising taxes on the wealthy and corporations without impacting those making below $400,000 a year.

After the Senate passed the bipartisan infrastructure plan, Biden slammed President Donald Trump for racking up $8 trillion in debt from tax cuts and vowed his spending would be fully paid for by tax hikes on the rich.

Biden has remained committed to raising taxes on the wealthy and corporations. When he introduced his infrastructure proposals, he wanted to fund them with a corporate-tax hike to 28%, still only a partial reversal of Trump’s 2017 corporate-tax cut. He said at the time that he was “sick and tired of ordinary people being fleeced.”

Republicans have strictly opposed raising taxes on the wealthy and corporations, leading Democrats to put wealthy tax hikes in their reconciliation bill, which can be passed without any Republican votes.

It will be a lot more expensive to not invest in infrastructure

The opportunity cost of not making Biden’s proposed investments is high. “We’ve grown used to America as the world’s greatest economic power, but we aren’t destined to stay that way,” Yellen wrote.

The price tag of Biden’s American Jobs Plan was originally $2 trillion, but moderate and Republican concerns on the plan being too costly led to a bipartisan agreement that ended up cutting over half the cost of the president’s initial proposal. Those cuts included care-economy measures, like eldercare and climate initiatives, that are now in the Senate Democrats’ reconciliation bill.

Insider reported last week that nine moderate House Democrats threatened to block the reconciliation bill until the infrastructure bill passes the House and gets signed into law, prompting criticism from progressives who have been stressing the need to pass the care-economy package alongside infrastructure.

“Let’s stop pretending that Dems who threaten to tank the President’s agenda, kill childcare/Medicare expansion, and work w/ GOP to expand the cruelest parts of our immigration system are “‘moderate,'” New York Rep. Alexandria Ocasio-Cortez wrote on Twitter. “They are not moderate. They’re conservative.”

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Janet Yellen says Treasury is prepared to pay the US’s bills to prevent ‘irreparable harm’ to the economy as GOP balks at raising debt ceiling

Mitch McConnell Janet Yellen Congress Treasury
Senate Minority Leader Mitch McConnell and Treasury Secretary Janet Yellen.

  • Yellen said Treasury is prepared to pay off the country’s bills starting August 2.
  • It comes as McConnell opposes raising the debt ceiling without political concessions.
  • Yellen said even the threat of a default risks major damage to the US economy.
  • See more stories on Insider’s business page.

Treasury Secretary Janet Yellen sent a letter to Congress urging lawmakers to renew the federal government’s ability to pay off its debt ahead of a major deadline, warning that failing to do so in a timely manner risks major damage for average people and the economic recovery.

Republicans led by Senate Minority Leader Mitch McConnell are balking at raising the debt limit without ensuring spending cuts from Democrats. He suggested earlier this week that Democrats would have to do it on their own with no GOP support.

In the letter, Yellen said the US will hit its statutory debt limit on August 1. The next day, she said Treasury is prepared to take “certain extraordinary measures” to pay the country’s outstanding bills and prevent a default that could ripple through the global economy.

“Failure to meet those obligations would cause irreparable harm to the economy and the livelihoods of all Americans,” Yellen wrote on Friday to House Speaker Nancy Pelosi. She noted that raising the debt ceiling doesn’t prompt more federal spending, it only authorizes the government to pay what it already owes.

Yellen underscored the potential damage that even the threat of a default could have on the economy. She cited a 2011 showdown between Obama and House Republicans that led to the first-ever credit downgrade of US debt. Yellen also said it’s hard to predict when Treasury would exhaust its ability to pay off the US’s bills on its own.

On Wednesday, the nonpartisan Congressional Budget Office forecasted Treasury would “probably” run out of cash sometime in October or November.

Republican opposition is hardening now that President Joe Biden sits in the White House. In July 2019, they voted to suspend the borrowing limit for two years under President Donald Trump.

A default from the federal government could precipitate a chain reaction of cash shortages, starting with US bondholders that include people, businesses, and foreign governments. Democrats insisted this week they wouldn’t allow the GOP to use the debt ceiling as a political weapon.

“We’ll handle our business,” Sen. Brian Schatz of Hawaii, a cosponsor of a bill to abolish the debt ceiling, told Insider on Wednesday. “This is something the Hill freaks out about every year or so. We will not negotiate over it, we will not concede anything and we won’t fail to do our job.”

The Biden administration is pushing lawmakers to raise the debt ceiling ahead of the August 2 deadline.

“We certainly expect Congress to act in a bipartisan manner as they did three times under the prior administration to raise the debt limit,” White House Press Secretary Jen Psaki said Friday.

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Mitch McConnell says GOP won’t strike a deal with Democrats for the US to pay its bills on time, raising risk of derailing the economic recovery

mitch mcconnell
Senate Minority Leader Mitch McConnell, R-Ky., does a cable news interview before the start of a two-week recess, at the Capitol in Washington, Wednesday, June 23, 2021.

  • McConnell ruled out GOP cooperation with Democrats to raise the debt ceiling.
  • “I can’t imagine there will be a single Republican voting to raise the debt ceiling after what we’ve been experiencing,” McConnell told Punchbowl News.
  • Treasury Secretary Yellen warned of an “absolutely catastrophic” hit to the recovery if the debt ceiling isn’t raised.
  • See more stories on Insider’s business page.

Senate Minority Leader Mitch McConnell said that he doesn’t envision any Congressional Republicans voting alongside Democrats to renew the federal government’s authority to pay its bills.

That raises the prospects of derailing the economic recovery if the debt limit isn’t raised quickly enough.

“I can’t imagine a single Republican in this environment that we’re in now – this free-for-all for taxes and spending – to vote to raise the debt limit,” McConnell told Punchbowl News, adding Democrats would have to raise it alone in a party-line bill that’s taking shape.

The Kentucky Republican’s remarks represents a major warning to Democrats as they begin assembling a $3.5 trillion reconciliation plan that’s poised to clear Congress without GOP votes. That’s the legislative pathway for certain bills to be approved with only a majority vote.

The federal government’s borrowing authority is set to end on July 30.

Treasury Secretary Janet Yellen urged lawmakers to raise it as she testified before a panel last month, raising alarm about an “absolutely catastrophic” hit to the economic recovery if the government’s borrowing authority isn’t renewed. Raising the debt limit doesn’t mean federal spending will increase.

If the federal government defaults, Yellen said it could trigger a chain reaction of cash shortages starting with US bond holders that include individuals, businesses, and foreign governments.

The Treasury Department can tap into emergency powers to keep payments flowing until a certain date. But Yellen told Congress it’s tough to predict when those will be exhausted this summer given the economic uncertainty stemming from the pandemic.

Republicans voted to suspend the borrowing limit in July 2019 for two years under President Donald Trump. Experts say Democrats could raise the ceiling in a reconciliation package sometime this fall. But that would require them to list a numerical figure because of the process’s strict budgetary rules, opening the door for GOP political attacks on Democrats as big spenders while the national debt tops $28.5 trillion.

On Wednesday, Republican Sen. Lindsay Graham of South Carolina is set to hold a press conference about Democrats’ “reckless tax and spending spree.”

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Treasury Secretary Janet Yellen warns of ‘absolutely catastrophic’ hit to economic recovery this summer if US can’t pay its bills on time

janet yellen fed
  • On Wednesday Secretary Yellen asked Congress to extend a July deadline to pay back some of the federal debt.
  • Without an extension, she warned of a “catastrophic” default that could hurt economic recovery.
  • Some in the GOP have signaled they want spending cuts in exchange for increasing the debt ceiling.
  • See more stories on Insider’s business page.

Treasury Secretary Janet Yellen urged Congress on Wednesday to extend a July 31 deadline to pay down a portion of the federal government’s $28 trillion in debt to investors and foreign governments.

Without the extension, she warned of an “absolutely catastrophic” default that would imperil the nation’s economic recovery from the pandemic.

“I think defaulting on the national debt should be regarded as unthinkable,” she told the Senate Appropriations Committee, calling it “utterly unprecedented in American history for the US government to default on its legal obligations.”

Though borrowing is a routine cycle the federal government uses to keep the country running through the sale of bonds, it’s reaching its “debt ceiling” on July 31 and needs to service its debt before it can borrow more. The Treasury has some ability to keep payments flowing beyond that date, but Yellen said it could exhaust those measures sometime in August during the month-long Congressional recess. Increasing the debt ceiling does not mean additional federal spending.

If the federal government defaults, Yellen said it could jumpstart a chain reaction of cash shortages starting with US bond holders, which include individuals, businesses, and foreign governments.

“I believe it would precipitate a financial crisis,” Yellen said. “It would threaten the jobs and savings of Americans and at a time we’re recovering from the COVID pandemic.”

Congress last suspended the borrowing limit in July 2019 for two years under President Donald Trump. Yellen also emphasized the pandemic is causing uncertainty around the Treasury’s emergency powers to step in with emergency payments if it became necessary.

Some Republicans have signaled they will press for spending cuts in exchange for signing onto a debt ceiling increase, despite supporting a surge of red ink under Trump. Among many Democrats, memories of a 2011 brawl between House Republicans and President Barack Obama on the debt ceiling are still fresh, as it sent stocks tumbling and caused the first downgrade to US credit.

“This is a page from the Obama-era economic sabotage playbook, and I’m not going to let Republicans play games with the economy for their political benefit,” Sen. Ron Wyden of Oregon, chair of the Senate Finance Committee, told Insider in April.

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4 unhealthy aspects of the current US economy, according to Janet Yellen

janet yellen fed
  • Treasury Secretary Janet Yellen discussed “destructive forces” in the economy in Senate Finance testimony.
  • They include wage inequality, racial inequality, the climate crisis, and the labor force participation rate.
  • All of those factors existed before the pandemic, but many have been exacerbated.
  • See more stories on Insider’s business page.

The coronavirus pandemic has thrown into relief some of the hidden realities of the American economy, from low wages to income inequality.

But in testimony in front of the Senate Finance committee, Treasury Secretary Janet Yellen highlighted four structural problems that plagued the economy even prior to the pandemic – although they may have intensified or grown more visible throughout the past year.

She cited wage inequality as a prime example. “In healthy economies,” she said, we see wage growth across the distribution – for workers making the highest incomes and those making the lowest. But over the past several decades, that has not been the case in our economy.”

Here are the four “destructive forces” that Yellen highlighted in her prepared testimony.

(1) Wage inequality

Wages have been trending down for years prior to the pandemic. As Insider’s Andy Kiersz and Ben Winck reported, wages have been declining for the past five decades. While recent economic data shows wages growing at the fastest rate since the 1980s, the lowest-wage workers still see average hourly wages that are nearly half of the overall average hourly wage. That might be driving a high quit rate.

“While the highest earners have seen their income grow, families at the bottom end of the distribution have seen their pay stagnate,” Yellen said. she also noted that disparities have widened between traditionally richer and poorer areas.

(2) People dropping out of the labor force, especially women

Yellen also noted that labor-force participation has dropped, with women leaving at a higher rate than comparable nations even before the pandemic.

From February 2020 to May 2021, the number of women in the labor force declined by 2.4% – meaning there were 1.79 million fewer women.

Following the May jobs report, Jasmine Tucker, the director of research at the National Women’s Law Center, told Insider it will take 13 months for women’s employment to reach pre-pandemic levels. That number doesn’t include the never-realized gains women would have seen in a pandemic-free world.

(3) Climate change and its cost on the economy

“Climate change adds a fresh layer of crisis on top of this – the average cost of climate-related disasters is expected to double every five years,” Yellen said in her prepared testimony.

Investors have said that the climate crisis is a “systemic threat” for the economy. In 2019, a New York Fed official said that climate events had cost over $500 billion in the past five years alone. Some Democratic senators have said that they’d oppose any bipartisan infrastructure deal that foregoes addressing the climate crisis.

(4) Racial inequality

“When I started studying economics in 1963, the average Black family’s wealth was about 15% of the average white family,” Yellen said in her prepared remarks. “Maybe that isn’t surprising: Jim Crow laws were still in effect. But what is surprising is that it’s almost 60 years later, and that ratio has barely changed.”

Throughout the pandemic, Black Americans were disproportionately impacted on multiple levels. Black Americans saw higher unemployment rates than white peers, and lower labor force participation rates.

The racial wealth gap has also widened over the years – even before the pandemic. Using data from the 2019 Survey of Consumer Finances, the Federal Reserve found that white families had a median wealth of $188,200. For Black families, it’s $24,100.

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