NIIGATA, Japan — After dozens of standoffs with Congress over government spending in recent decades, Treasury Secretary Janet Yellen said Thursday that in her opinion, the United States should adopt a different system for national finances.
Emphasizing that it was her own opinion, not President Biden’s, Yellen said there are various alternatives for avoiding situations where the Treasury lacks the funds to pay its bills.
U.S. Treasury Secretary Janet Yellen takes questions from journalists during a press conference, at the G7 meeting of Finance Ministers and Central Bank Governors, at Toki Messe in Niigata, Japan on Thursday. Shuji Kajiyama/Associated Press
In January, the U.S. government ran up against its legal borrowing limit of $31.381 trillion, and the Treasury Department began implementing “extraordinary measures” to avoid missing payments on its bills.
It’s a predicament that has occurred nearly 80 times since 1960, she said. The Treasury Department has warned the U.S. could default as soon as June 1 if there is no deal.
“Personally, I think we should find a different system for deciding on fiscal policy,” Yellen said when asked about the issue. Congress could repeal the debt ceiling or handle it differently. The president could decide to raise the debt ceiling and inform Congress, which could vote to override that decision, and the president could veto that, and it would take a supermajority of two-thirds of Congress to override the veto.
Congress votes on taxes and government spending and “those decisions imply a path of deficits,” Yellen said. Bills come due because of those decisions and that makes the Treasury responsible for paying for goods and services already contracted.
Biden wants the debt ceiling raised. Republican House Speaker Kevin McCarthy is calling for trillions of dollars in spending cuts over the coming decade in return for an increase.
The debt ceiling then creates a situation where “we can’t pay all the government’s bills, and I don’t think that’s any way to run the government,” she said. The U.S. Treasury note is the most important asset in global financial markets, and a loss of confidence in its value would put financial markets in turmoil.
“To go through this every couple of years is tremendously damaging,” Yellen said.
For now, raising the debt ceiling to avert a default on the national debt remains the only short-term solution, she said.
Yellen spoke ahead of a meeting in Japan of finance ministers and central bank governors of the Group of Seven advanced economies.
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