Janet Yellen, United States Treasury Secretary, speaks at the Independent Community Bankers Of America (ICBA) Capital Summit in Washington, DC, U.S., Tuesday, May 16, 2023.
Nathan Howard | Bloomberg | Getty Images
Treasury Secretary Janet Yellen said on Sunday that “tough choices” will have to be made about which bills will remain unpaid if the debt ceiling is not raised.
Yellen reiterated her warning that the United States could default on debt as early as June 1, which she said could cause widespread “economic chaos”. There won’t be good results if Congress doesn’t take action, she said.
“We are focused on raising the debt ceiling, and there will be tough choices if that doesn’t happen,” she told NBC’s “Meet the Press.” “There can be no acceptable outcome if the debt ceiling is not raised, whatever decisions we make.”
Raising the debt ceiling is necessary for the government to cover spending commitments already approved by Congress and the President to avoid defaults. Raising the debt ceiling does not authorize new spending, but House Republicans have said they will not raise the limit if Biden and lawmakers do not agree to future spending cuts.
As a result, recurring deliberations on Capitol Hill have been strained.
President Joe Biden said Sunday that Republicans “need to get out of their extreme position” at a press conference ahead of his departure from the Group of Seven summit in Japan. After negotiations stalled on Saturday night, Biden said he planned to call House Speaker Kevin McCarthy, R-California, on his way back to Washington.
“It’s time for Republicans to accept that there is no bipartisan deal to be struck solely, solely, on their partisan terms,” Biden said.
McCarthy told reporters on Sunday after arriving at the Capitol that he planned to speak to Biden “within the next hour,” adding that he was happy the president was returning to the United States.
“I think he has to step away from the socialist wing of the Democratic Party and represent America. And that means both sides have to compromise,” McCarthy said. “I’ve been there the whole time.”
At the Capital Summit of the Independent Community Bankers of America on Tuesday, Yellen said the White House Council of Economic Advisers found that a default could lead to an economic downturn as severe as the Great Recession, with 8 million Americans losing their jobs and the value of the stock market falling. about 45%.
She also noted a Moody’s Analytics report that found similar numbers with more than 7 million Americans out of work and $10 trillion in household wealth evaporated. Yellen also warned that a breach of the debt ceiling could affect essential government services.
Biden said Sunday he believed a deal could be reached with Republicans, but that was not certain.
“I can’t guarantee they wouldn’t force a default by doing something outrageous,” he said.