Janet Yellen, US Secretary of the Treasury, speaks during the Independent Community Bankers Of America (ICBA) Capital Summit in Washington, DC, the United States, on Tuesday, May 16, 2023.
Nathan Howard | Bloomberg | Getty Images
Treasury Secretary Janet Yellen said on Sunday that “hard decisions” 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 its debt as early as June 1, which she says could lead to widespread “economic chaos.” There will be no good outcomes unless Congress takes action, she said.
“Our focus is on raising the debt ceiling and there will be tough decisions if that doesn’t happen,” she told NBC’s Meet the Press. “There can be no acceptable outcomes unless the debt ceiling is raised, no matter what decisions we make.”
Raising the debt ceiling is necessary for the administration to meet spending commitments already approved by Congress and the President to avoid a default. Raising the debt ceiling does not authorize new spending, but Republicans in the House of Representatives have said they will not raise the limit unless Biden and lawmakers agree to future spending cuts.
As a result, the ever-changing deliberations on Capitol Hill were tense.
President Joe Biden said Sunday during a news conference ahead of his farewell to the Group of Seven summit in Japan that Republicans “must move away from their extreme position.” After negotiations stalled late Saturday, Biden said he plans to call House Speaker Kevin McCarthy, R-California, on his way back to Washington.
“It’s time Republicans accepted that there is no bipartisan deal that can be made solely on their partisan terms,” Biden said.
McCarthy told reporters Saturday that the White House had “regressed,” adding that he didn’t think negotiations could move forward until Biden returned to the US
At the Independent Community Bankers of America Capital Summit on Tuesday, Yellen said the White House Council of Economic Advisers had concluded that a default could lead to an economic downturn as bad as the Great Recession, which has left 8 million Americans out of work lose and the value of the stock market falls by about 45%.
She also pointed to a Moody’s Analytics report that found similar numbers: More than 7 million Americans are out of work and $10 trillion in household wealth has disappeared. Yellen also warned that breaching the debt ceiling could affect essential government services.
Biden said Sunday he believed an agreement could be reached with Republicans but was not certain.
“I can’t guarantee they wouldn’t force a default by doing something outrageous,” he said.