Yesica Fisch\/Associated Press<\/i><\/span> <\/p>\n<\/div>\nDAKAR, Senegal \u2014 U.S. Treasury Secretary Janet Yellen said in an Associated Press interview Saturday she expects Congress will ultimately vote to raise America\u2019s debt limit, but demands by House Republicans for spending cuts in return for backing an increase are \u201ca very irresponsible thing to do\u201d and risk creating a \u201cself-imposed calamity\u201d for the global economy.<\/p>\n
The Biden administration and Republican lawmakers have been at loggerheads over how to increase the government\u2019s legal borrowing capacity. On Thursday, the government bumped up against the $31.381 trillion debt cap, forcing the U.S. Treasury Department to take \u201cextraordinary\u201d accounting steps to keep the government running.<\/p>\n
Asked in the interview, conducted during her trip to Africa, about such talk of withholding approval for a higher debt limit unless there are accompanying spending cuts, Yellen called that stance \u201ca very irresponsible thing to do\u201d and said it could have serious consequences even before \u201cthe day of reckoning.\u201d<\/p>\n
\u201cIt is possible for markets to become quite concerned about whether or not the U.S. will pay its bills,\u201d she said, pointing to the negative economic impacts of a debt showdown in 2011.<\/p>\n
As for a potential default, she said, that \u201cwould impose a self-imposed calamity in the United States and the world economy.\u201d The Treasury\u2019s extraordinary steps so far mean that the U.S. government should be able to operate until some point in June when the limit would need to be increased to avoid what could be significant economic damage.<\/p>\n
Yellen said she has not spoken with U.S. Rep. Kevin McCarthy, the newly elected Republican speaker of the House. McCarthy has yet to spell out the size and target of the spending cuts that he contends are needed to put the federal government on a healthier financial path.<\/p>\n
President Joe Biden and administration officials have called for a \u201cclean increase\u201d \u2013 not linked to cuts \u2013 to the borrowing capacity, saying that the risks of an extended impasse could lead to a deep recession that would echo dangerously worldwide if faith is lost in the credit of the U.S. government.<\/p>\n
\u201cCongress needs to understand that this is about paying bills that have already been incurred by decisions with this and past Congresses and it\u2019s not about new spending,\u201d Yellen said. She said she believes in making sure that government debt levels are sustainable, \u201cbut it can\u2019t be negotiated over whether or not we\u2019re going to pay our bills.\u201d<\/p>\n
Despite the dire warnings, Yellen said she believes the situation ultimately will be defused because lawmakers can appreciate the escalating danger if the federal government was unable to pay all of its bills: crashing financial markets, mass firings, and an economic downturn that could jeopardize America\u2019s place in the world hierarchy.<\/p>\n
\u201cI believe in the end we will find a way around this,\u201d Yellen said.<\/p>\n
The treasury secretary sat down for the Saturday interview in the middle of a continent-spanning trip, in which she met with her Chinese counterpart in Switzerland before heading to Senegal, Zambia, and South Africa.<\/p>\n
The Biden administration is trying to signal its support for improving the economies of African countries, many of which have young populations that will eventually make those nations the drivers of growth in decades to come. At an African nation summit held in Washington last month, Biden said he would visit the continent this year in a sign of the desire to increase engagement with the United States.<\/p>\n
Before the interview, Yellen went to Senegal\u2019s Goree Island, touring a building known as the House of Slaves which was a center for the Atlantic slave trade that defined much of American history.<\/p>\n
The economist and former Federal Reserve chair have emphasized her desire to reduce racial and income inequality, an element of the systemic racism tied to slavery and its aftermath of segregation. For Democrats, the issue of how to bridge that divide is not just a matter of social justice but political pragmatism, given that Black voters are a key constituency for winning elections.<\/p>\n
Yellen said the administration has not turned to reparations \u2013 payments and other programs intended for the descendants of slaves \u2013 to address the inequality.<\/p>\n
\u201cThe administration has not embraced reparations as part of the answer,\u201d said Yellen, adding that \u201cwe have a program to try to address these issues that involve many positive steps and adjustments and increasing opportunity.\u201d<\/p>\n
America is trying to appeal to African countries on moral terms, saying that aid and loans from the U.S. will be transparent and fair in ways that Chinese investments have not been.<\/p>\n
Relations between the U.S. and China \u2013 the world\u2019s two largest economies \u2013 have taken on an increasingly antagonistic streak amid the geopolitical fallout from China\u2019s friendship with Russia, the persistence of the coronavirus, and an era of open globalization that has given way to national security priorities.<\/p>\n
The past two U.S. presidential administrations have challenged China\u2019s trade practices, with the Biden administration limiting the export of advanced computer chips as it simultaneously tries to boost the U.S. sector.<\/p>\n
\u201cThis is not a competition with China \u2014 we want to deepen our engagement with Africa,\u201d Yellen said. \u201cWe want to make sure that we don\u2019t create the same problems that Chinese investment has sometimes created here. That we have transparency, that we have projects that bring broad-based benefits to the African people and don\u2019t leave a legacy of unsustainable debt.\u201d<\/p>\n
Associated Press writer Josh Boak in Baltimore contributed to this report.<\/em><\/p>\n
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