By Michael S. Derby
NEW YORK (Reuters) – The United States risks long-term damage if Congress does not raise the national debt ceiling, Federal Reserve Chair Jerome Powell said on Tuesday.
“Congress really needs to raise the debt ceiling … if we fail to do so, I think that the consequences are hard to estimate, but they could be extraordinarily adverse and could do long-standing harm,” Powell said during an appearance before the Senate Banking Committee as part of his semi-annual testimony on the economy and monetary policy.
The Congressional Budget Office last month said the U.S. Treasury Department will exhaust its ability to pay all its bills sometime between July and September, unless the current $31.4 trillion cap on borrowing is raised or suspended.
Republicans, who control the U.S. House of Representatives, want to withhold a debt limit increase until Democrats agree to deep spending cuts. Democrats say the debt limit should not be “held hostage” to Republican tactics over federal spending.
A debt ceiling showdown in 2011 roiled markets and led to a downgrade by credit ratings agency Standard & Poor’s.
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(Reporting by Michael S. Derby; Additional reporting by Lindsay Dunsmuir; Editing by and Paul Simao)