US Congress Debt Ceiling Increase Vote Fails, Default Timeline Predicted
Jamie Dimon, JP Morgan CEO, "Already Preparing for Default"
[Asia Economy New York=Correspondent Baek Jong-min, Reporter Kim Su-hwan] Janet Yellen, U.S. Treasury Secretary (photo), warned in Congress that if the national debt ceiling is not raised, an unprecedented default could occur around October 18.
On the 28th (local time), during her opening remarks at the Senate Banking Committee hearing, Secretary Yellen stated, "Around October 18, the extraordinary measures to address the debt ceiling will effectively end," and warned, "(Without raising the debt ceiling) the United States will declare default for the first time in history."
Secretary Yellen also raised the possibility of a national default on October 18 in a letter sent to House Speaker Nancy Pelosi. This is the first time Yellen has specified a concrete date for a potential national default.
Yellen emphasized that a national default would undermine full faith and credit in the United States and trigger a financial crisis and economic recession, urging lawmakers, "This issue must be resolved. We must avoid a catastrophic event for our economy."
Jamie Dimon, CEO of JPMorgan Chase, the largest bank in the U.S., echoed Yellen’s claims, warning that a failure to raise the debt ceiling would "bring disaster."
In an interview with a major foreign media outlet on the same day, CEO Dimon said, "(Our bank) has begun preparing for the possibility of a breakdown in debt ceiling negotiations," and urged, "We hope policymakers seek solutions to prevent default."
The U.S. debt ceiling stands at $28.5 trillion, but spending related to COVID-19 response has already pushed it beyond the limit. Yellen’s warning came after the Senate, a day earlier, effectively rejected a procedural vote on a combined debt ceiling increase and temporary budget bill by 48 in favor and 50 against.
More urgent than a national default is reaching an agreement on the temporary budget. Although 20 days remain until a potential default, the U.S. government shutdown is only two days away. Yellen expressed concern that a shutdown would negatively impact not only the COVID-19 response but also the U.S. economy.
At an event hosted by the National Association of Manufacturers on the same day, Yellen also emphasized the need to raise the corporate tax rate. She stated, "The total tax revenue as a share of GDP in the U.S. ranks in the bottom 25% among advanced countries, and the share of corporate tax in GDP is the lowest," arguing that "corporations must pay their fair share to contribute to the economy." The Biden administration plans to raise the current 21% corporate tax rate to 26.5% to fund infrastructure investments.
U.S. companies are opposing the plan to increase the corporate tax rate. According to a third-quarter CEO survey released by the Business Roundtable, a leading U.S. business association, respondents identified the corporate tax increase as the biggest threat to investment and employment plans.
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