U.S. Treasury Secretary Janet Yellen 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 if the debt ceiling is not raised, “difficult choices” will need to be made about which bills will remain unpaid.
Yellen reiterated her warning that the U.S. could default on its debt as early as June 1, which she has said could lead to widespread “economic dislocation.” She said that if Congress does not act, there will be no good outcome.
“We’re focused on raising the debt ceiling, and if we don’t, we’re going to have tough choices,” she told NBC’s “Meet the Press.” “Without raising the debt ceiling, no matter what we decide, there can be no acceptable outcome.”
Raising the debt ceiling is necessary for the government to pay the spending pledges already approved by Congress and the president to prevent default. Raising the debt ceiling won’t authorize new spending, but House Republicans have said they won’t lift the cap if Biden and lawmakers don’t agree to future spending cuts.
As a result, on-again, off-again deliberations on Capitol Hill have been tense.
Republicans “need to change their extreme positions,” President Joe Biden said at a news conference before he left for the G7 summit in Japan on Sunday. After talks stalled Saturday night, Biden said he planned to call House Speaker Kevin McCarthy on his way back to Washington.
“It’s time for Republicans to accept that no bipartisan agreement can be made fully, exactly on their partisan terms,” Biden said.
McCarthy told reporters on Saturday that the White House has “backtracked,” adding that he does not think negotiations can move forward until Biden returns to the United States
Yellen said at the Independent Community Bankers Capital Summit in the United States on Tuesday that the White House Council of Economic Advisers found that a default could cause an economic recession as severe as the Great Recession, with 8 million Americans losing their jobs and stock market values falling by about 45%.
She also notes that a Moody’s Analytics report found similar numbers, with more than 7 million Americans out of work and $10 trillion in household wealth evaporated. Yellen also warned that breaching the debt ceiling could affect essential government services.
Biden said on Sunday he thought a deal could be reached with Republicans, but wasn’t sure.
“I can’t guarantee that they won’t enforce a default by doing something outrageous,” he said.