As Congress again wrestles over raising the level of debt the government can incur, Federal Reserve Chairman Jerome Powell cringed at what would happen if it fails to do so.
“It’s beyond even consideration. The idea that the U.S. would not honor all of its obligations and pay them when due is something that can’t even be considered,” the central bank leader said Tuesday in response to a question from Sen. Jon Tester, D-Mont.
The debt limit would come back into effect March 2 should Congress not enact legislation allowing for more borrowing.
Even if the debt ceiling is not raised, it would not immediately mean that the U.S. couldn’t pay its bills. The Treasury Department can use “extraordinary measures” to continue funding operations, a process that would last for several months.
However, every time the warring parties come close to hitting the ceiling, it raises the specter of the U.S. defaulting on its debts, which now total just over $22 trillion.
“I think it would be a very big deal not to pay all of our bills when and as due,” Powell said. “That’s something I think the U.S. government should always do.”
Powell made the remarks during his semiannual testimony before Congress, which started Tuesday before a Senate finance committee and continues Wednesday in the House.