The U.S. Secretary of the Treasury has lambasted Donald Trump’s controversial idea that the Republicans should allow the U.S. to default on its debts if spending cut demands aren’t met.
In a televised town hall aired Wednesday evening on CNN, former president Trump said Republican lawmakers should hold steady on their stipulations that to raise the debt ceiling, large spending cuts must be instituted.
Trump dismissed warnings that a default would be “catastrophic” not only for the American public but also for America’s standing on the world stage, saying the issues is “really psychological more than anything else”.
It is unclear whether Trump thinks the U.S. economy would escape the debacle unscathed, adding: “It could be really bad, it could be maybe nothing, maybe it’s a bad week, or a bad day, who knows?”
Trump, who this week has been ordered to pay $5 million after being found liable for sexual abuse and defamation, piled pressure directly on Republican peers: “I say to the Republicans out there, congressmen, senators, if they don’t give you massive cuts, you’re gonna have to do a default.”
During President Biden’s time in office, the Democrats have spent trillions on a post-pandemic rescue deal, as well as social policies and climate change bills.
The Democrats, according to Trump, have been spending like “drunk sailors”.
The 2024 presidential candidate—who is also the first president to be charged with criminal activity—seemed confident that a default situation wouldn’t arrive because the Democrats will “absolutely cave”.
But Trump also intimated that if the U.S. doesn’t default now it will “do it later”, saying it was the only way to “save the country”.
“Our country is being destroyed by stupid people, by very stupid people,” the former Apprentice host said.
Default is “unthinkable”
Trump’s conclusions have been resoundingly rejected by Treasury Secretary Janet Yellen, who said: “The notion of defaulting on our debt is something that would so badly undermine the U.S. and global economy that I think it should be regarded by everyone as unthinkable.”
Speaking to reporters ahead of a meeting with G-7 finance ministers and central bank governors in Japan, Yellen said she was aware of Trump’s mandate to Republicans.
“America should never default,” she reiterated.
The Democrats want to eradicate the practice of debt brinkmanship entirely, warning of impacts such as job losses and a recession should an agreement not be reached.
The Congressional Budget Office has warned the U.S. could run out of cash in a matter of weeks, with Yellen previously stating the coffers could be dry by June 1.
A letter posted by director Phil Swagel online said: “The projected exhaustion date remains uncertain, however, because the timing and amount of revenue collections and outlays over the coming weeks are difficult to predict.
“The extent to which the Treasury will be able to fund the government’s ongoing operations using cash balances and remaining extraordinary measures will also remain uncertain throughout May, even if it turns out that the Treasury runs out of funds in early June.”
Questioned about the Biden administration’s plan should the U.S. default, Yellen steered the conversation back to raising the debt ceiling: “There is no good alternative that will save us from catastrophe.
“I don’t want to get into ranking which bad alternative is better than others, but the only reasonable thing is to raise the debt ceiling and to avoid the dreadful consequences that will come.”
The U.S. Congress has raised the debt ceiling 80 times since 1960, she added, saying that to stop now would create “a crisis of our own making.”
Both parties have raised the debt ceiling in the past—which now sits at $31.4 trillion—with Yellen encouraging Congress “to act quickly to do so once again”.
“Another meeting is scheduled for next Friday and staff are working to see if they can resolve this, so I’m very hopeful the differences can be bridged and the debt ceiling will be raised,” she said on Thursday.
