Debt ceiling deadline: Who is Janet Yellen? What’s the role of the US Secretary of the Treasury?
Treasury Secretary Janet Yellen has sent stark warnings about what a US debt default would mean for the domestic and international economy.
According to Treasury Secretary Janet Yellen, the US federal government could run default on its debts as soon as early June. As negotiations between the White House and Republican congressional leaders continue, the Secretary has not played a major role besides providing the parties with details of when the Treasury Department would be unable to pay its debts.
On 15 May, Sec. Yellen wrote another letter to Speaker of the House Kevin McCarthy, updating the Treasuring Department’s estimates on when the country would be unable to pay its bills. The secretary wanted to make clear that there still existed a great risk to the health of the economy if the country moved into default, which could happen “as early as June 1.”
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The letter also made clear the risks of “waiting until the last minute to suspend or increase the debt limit,” which could “cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.” In other words, the closer the economy gets to the deadline, the behavior of investors and consumers will shift, which could lead to poor outcomes when the economy is already in very uncertain territory.
If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests.
Secretary Yellen begins meeting with business leaders
Last week, as the deadline for Day X approaches (Day X being the day that the Treasury can no longer pay its bills), the Secretary began to meet with business leaders to reassure them of the strength of the economy. These meetings could help to galvanize industry leaders to put pressure on congressional leaders to bring a bill to increase the country’s debt limit to the floor.
A quick biography of Secretary Yellen
Janet Yellen has broken many barriers throughout her life and career. The now-Treasury Secretary graduated from Yale University with a Ph.D. in economics in 1971. The young academic would go on to teach at Harvard University, where she was one of only two women in the economics department.
In the late 1970s, she began working as a staff economist at the Federal Reserve’s Board of Governors. Over the next thirty years, Dr. Yellen would jump between working in the public sector and academia. Then, in 2004 she was appointed President of the Federal Reserve Bank of San Francisco —a transition that marked her trajectory for the next decade. In 2010, Presidnet Barack Obama nominated her Vice Chair of the Federal Reserve, and in 2014 Sec. Yellen became the first woman to become Chair of the Federal Reserve following the exodus of Ben Bernanke.
During the Trump administration, Sec. Yellen worked as a fellow at the Brookings Institute and left when she was appointed Treasury Secretary by Presidnet Biden.