Yellen warns of “financial chaos” if Congress would not move a debt ceiling

US Treasury Secretary Janet Yellen holds a press conference at the US Treasury Department on April 11, 2023 in Washington, DC.

Stefanie Reynolds | AFP | Getty Images

Treasury Secretary Janet Yellen said on Sunday that not raising the debt ceiling would lead to a “precipitous economic downturn” in the US, and she reiterated her warning that the Treasury Department could run out of measures to pay its debt obligations by June.

“Our current projection is that there will come a day in early June when we won’t be able to pay our bills unless Congress raises the debt ceiling, and I urge Congress to do so,” Yellen told ABCs “This week”.

Yellen said the US had already taken “extraordinary measures” to avoid a default and the Treasury Department could not continue to do so. She said Congress must take action to avoid “economic calamity.”

“There is a broad consensus that financial and economic chaos will ensue,” Yellen said.

Lawmakers have tried to find a way forward to raise or suspend the debt ceiling, which would allow the US to pay its bills on time. But they are currently at an impasse, increasing the likelihood of a default.

Yellen has called for decisive action, and fast. In a letter to House Speaker Kevin McCarthy, R-Calif., on Monday, Yellen said new tax revenue data had forced the department to raise its estimate of when the Treasury Department “will be unable to meet all of its obligations.” to comply with the government”. possibly as early as June 1st. That date is earlier than Wall Street economists were expecting.

On Monday, President Joe Biden called out the “Big Four” congressional leaders — Senate Majority Leader Chuck Schumer, DN.Y., Senate Minority Leader Mitch McConnell, R-Ky., McCarthy, and House Democratic Leader Hakeem Jeffries , NY — to invite her to a May 9 meeting at the White House to discuss the debt limit, a White House official told NBC.

Jeffries said Sunday that the meeting organized by Biden is “very important” and will help the US find a way forward.

“We have to avoid defaults, period,” he told NBC’s Meet the Press.

But for Sen. James Lankford, R-Okla., the debt ceiling meeting should have happened much sooner. He said the issue was raised in the week after the November election and President Biden’s refusal to negotiate was “staggering.”

“Everyone knew this was coming and the President has refused to negotiate it,” he told ABC’s This Week on Sunday.

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