By David Lawder
NUSA DUA, Indonesia (Reuters) – As the odds of a U.S. Congress split increase, Treasury Secretary Janet Yellen has warned lawmakers’ failure to raise the U.S. debt statutory ceiling poses a “huge threat” for the US credit rating and the functioning of US financial markets. .
Yellen told Reuters in an interview in New Delhi on Friday that cooperation was still possible with Republicans on some issues, but lifting the debt ceiling is a non-negotiable item.
Some Republicans have threatened to use the upcoming $31.4 trillion debt ceiling hike as leverage to force concessions from US President Joe Biden, a Democrat. U.S. government debt stood at $31.2 trillion on Wednesday and with no increase, analysts anticipate a potential default crisis by the third quarter of 2023.
Republicans who regained control of Congress in the 2010 election brought the US to the brink of default in a demand for spending cuts the following year, prompting a first-ever US Treasury ratings downgrade by Standard and Poor’s .
Asked if Democrats should pass legislation in the post-election session, when they would still retain a majority through January regardless of the election outcome, Yellen said it was urgent raise the debt ceiling.
“I think it’s irresponsible not to raise the debt ceiling. It’s always been raised,” Yellen said. “It would be a huge threat to the country not to, and completely irresponsible to threaten America’s credit rating and the functioning of the most important financial market.”
A US Treasury official said the department would be happy to see the measure passed before the newly elected Congress meets in January, adding: “It has to be done.”
BIPARTISAN WORK STILL POSSIBLE
Yellen said she was not ready to admit that Biden’s legislative agenda would be stalled by an impasse, adding that she would defend the recently passed measures against Republicans who want to undermine some of his spending and tax policies.
“We will definitely try to protect the gains we’ve made over the last year and a half,” Yellen said.
If Republicans can win control of both the House and Senate, some have pledged to pass legislation to make Trump-era tax cuts permanent and reverse parts of the $430 billion bill. dollars on Biden’s green energy and health care subsidies passed by Democrats.
Among the measures most frequently targeted are $80 billion in new funds for the Internal Revenue Service to bolster tax compliance and customer service and a 15% national alternative minimum tax for large corporations – the main sources funding for the measure.
Yellen, who is currently attending the G20 summits in Indonesia, spoke before Mark Kelly prevailed in a close Arizona Senate race, leaving Democrats needing just one of the other two undecided seats to retain control of the Senate.
In the House, Republicans had won 211 seats, seven short of a majority of 218.
She said some Republicans supported last year’s infrastructure bill and this year’s investments in semiconductors and research, and that the administration would seek measures that would attract more bipartisan support.
GLOBAL TAX AGREEMENT
Another issue Yellen faces with a potentially divided Congress is the failure to implement a global agreement to erect a 15% minimum corporate tax after a Democratic senator objected.
“I want this to happen. I wish the United States had come first. It didn’t happen,” said Yellen, who helped broker last year’s deal to put an end to a competitive downward spiral of corporate taxes by countries attracting investment. .
She said she believes most countries in the European Union will proceed to implement the 15% corporate minimum, which means that US companies that currently pay US taxes of 10.5% abroad could end up paying the difference to these governments from 2024.
“And eventually, as they do, the pressure will increase on the United States to comply as well. Because countries that have adopted the label will be able to put taxes on companies based in under-taxed countries. like the United States.”
(Reporting by David Lawder; Editing by Diane Craft)
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