Yellen fears US default would damage the global economy, US leadership. On Thursday, Treasury Secretary Janet Yellen asked Congress to extend the $31.4 trillion federal debt ceiling to avoid a historic default that would cause a worldwide economic slowdown and threaten U.S. global economic leadership.

In a news conference before a meeting in Japan with the Group of Seven (G7) affluent nations, India, Indonesia, and Brazil, Yellen offered the latest in a series of increasingly dire warnings.

A default would jeopardize our epidemic recovery progress. Moreover, she claimed it would cause a global recession that would throw us back much more. “It would also risk undermining U.S. global economic leadership and raise questions about our ability to defend our national security interests.”

On Wednesday, U.S. President Joe Biden warned that Congress’ failure to act before the Treasury runs out of money to pay the government’s obligations, which could happen as early as June 1, might cause a recession.

Yellen called Republican brinkmanship a “crisis of our own making” and warned that the fear of default might lower the U.S. government’s credit rating, as happened during the 2011 debt ceiling dispute.

Yellen said that debt due around June 1 was already rising, which might raise mortgage, vehicle, and credit card rates.

Biden, a Democrat, believes Congress has a constitutional obligation to extend the debt ceiling, which represents already spent government money, without restrictions. Still, House Republicans have connected any debt limit hike to severe budget cutbacks.

The U.S. limits borrowing, unlike other wealthy nations. Lawmakers must regularly boost that threshold because the government spends more than it earns.

Yellen’s G7 summit goals included individual and cooperative initiatives to improve the global economy and lower inflation, recommitting to helping Ukraine defend itself against Russia’s invasion, and longer-term efforts to increase economic resilience.

Despite negative risks, Yellen said the global economy was healthier than many had projected six months ago. Most G7 nations have witnessed a decline in annual headline inflation and improved growth prospects.

Yellen said the U.S. had passed laws to invest in infrastructure, alternative energy, and semiconductor chips after the bankruptcy of three regional banks.

She said that G7 members would collaborate to advocate for “timely and comprehensive” debt relief for debt-stricken nations. Yellen has often chastised China, the world’s largest sovereign creditor, for delaying such agreements.

Yellen said she would engage with her G7 counterparts to increase domestic production of vital products and help poor nations join global supply chains to strengthen economic resilience.

She said it included assisting such nations evolve from “solely extractive industries into activities that provide greater support for the domestic economy and employment.”

Yellen offered no details but said the initiative would expand on the G7’s Partnership for Global Building and Investment’s $600 billion in private money for building projects in underdeveloped nations.

In a speech last month, Yellen said the G7—the U.S., Japan, Germany, Britain, France, Italy, and Canada—would continue to mitigate geostrategic risks and counter-economic coercion.